As Nigeria progresses towards recession from the rising challenges of inflation, analyst and experts hold varying skeptic positions of revamping the economy.
Statista, a German Database firm with a speciality in the market and consumer data forecasted Nigeria’s inflation to peak at 16.1 per cent in 2022. By April however, inflation in Nigeria has surpassed the projection, shooting up to 16.82 per cent, 0.72 per cent above Statista’s forecast.
As to the last figure declared by the NBS, the nation’s statistics agency, inflation has climbed to 18.60 per cent.
Although inflation is currently a global issue, Nigeria’s experience in the first half of the Year 2022 is however worrisome, climbing month on month and indicative of a close to recession.
In January, inflation peaked at 15.60 per cent, it shot up to 15.70 per cent in February and, 15.92 per cent in March. By April, it has risen to 16.82 per cent, 17.71 per cent in May and 18.60 per cent in June.
A check across Africa shows Nigeria’s June inflation figure is the eighth highest on the continent, better than only seven countries. Malawi’s inflation figure is 19.1 per cent, Sierra Leone’s is 22.44 per cent and Angola’s is 22.96 per cent.
Ghana has shot up to 29.8 per cent, Ethiopia is 34 per cent, and Zimbabwe and Sudan are on the same level of 192 per cent.
45 countries’ inflation is below Nigeria, ranging from South Sudan which is -4.29 per cent to Burundi whose inflation rate stands at 17.57 per cent. Tunisia is 8.1 per cent while South Africa which is always compared to Nigeria has its inflation at 6.5 per cent.
Nigerians are now in fear that the economy might have entered its worst route in five years, going by the latest 18.60 per cent rate.
The latest Consumer Price Index (CPI) report shows that the inflation rate jumped to 18.6 per cent on a year-on-year (y/y) basis in June from 17.71 per cent in May, hitting a five-year high when the inflation peaked at 18.72 per cent in January 2017. Food and core inflation also throttled to 20.60 per cent and 15.75 per cent
Food prices hit the rooftop beyond what an average Nigerian can afford as incomes remain stagnant, salaries are being slashed, delayed and not paid as when due, and the minimum wage is stuck at N30,000. The increasing cost of diesel, fuel and cooking gas has even added to the hardship Nigerians now face.
Recent reports show that the number of poor people in Nigeria is to hit 95.1 million in 2022 from 89 million in 2020 (World Bank); the unemployment rate has worsened to 33 per cent (NBS); the country barely produces exports except for crude petroleum products which account for about 92 per cent of the country’s exports.
But, the Russia-Ukraine war, theft, vandalism, and subsidy payment, among other factors are hampering the proceeds from the crude oil. This is even as all the real sectors ranging from the education sector to housing, manufacturing, to agriculture are seen painting negative pictures of growth.
The economic quagmire, no doubt, may push the Central Bank of Nigeria (CBN) to take some drastic decisions at its two-day Monetary Policy Committee (MPC) meeting which commences today, Monday, July 18, to address the current economic woes.
The several issues of inflation which have recorded a significant impact on the Nigerian economy and by extension on the masses would be consequential on several factors.
In the face of economic and financial challenges, members of the rate-fixing arm of the Central Bank of Nigeria (CBN), the Monetary Policy Committee (MPC), will face tough choices in the next two days as the sustained inflationary pressure remains a major challenge for the apex bank.
It will be the second interest rate hike in two months if the most likely choice scales the voting hurdle as the Committee begins its 286th meeting.
The committee is boxed in between expressing its independence or jumping on the bandwagon of hawks, who are throwing everything into the ring to tame surging inflation.
The stakes are indeed high. Growth is flattening or falling, heightening fear of the worst stagflation in recent years. In the first quarter, the economy grew at 3.1 percent, a far cry from the expectations of government. Data of the second quarter are not ready.
The rising inflation poses a significant challenge to the CBN, in particular, which had hoped to contain the index within the six percent to nine percent band.
The MPC, while citing inflationary concerns, during its last meeting in May, had resolved to raise the Monetary Policy Rate (MPR) by 150 basis points to 13 percent in response to the global inflationary pressures, which had continued to hurt economies around the world, after holding the benchmark rate constant at 11.5 percent for about two and a half years.
The MPR is the rate at which the apex bank lends to commercial banks and often determines the cost of funds in the economy. But there seems to be a consensus that the performance was dented by rooftop diesel costs that forced many businesses to halt or stagger operations amid heightened political risk.
As the MPC meets, analysts said inflation was likely to top its agenda following the current commodities supply gaps in the global economy, occasioned primarily by the war between Russia and Ukraine, which had sent energy prices to the ceiling.
This meeting may not be everything but unusual. Ahead of the session, members were tucked away in Ibeju-Lekki axis of metropolitan Lagos, to “assess its framework” and interventions of the past eight years.