Nigeria’s inflation rises 8.4% as weak naira weighs on imports

Nigeria’s inflation moved up for the fourth straight month in February to 8.4 percent as tumbling naira continues to weigh on cost of imported goods.

Since November 2014, inflation has moved up 0.5 percentage points gradually from 7.9 percent to the present level. The local currency has witnessed some bashing since late last month, weakening to over N200/$ presently.

The National Bureau of Statistics (NBS) reported on Tuesday that in February, Consumer Price Index (CPI) which measures inflation rose by 8.4 percent (year-on-year), 0.2 percentage points from 8.2 percent recorded in January.

The faster pace in the Headline Index was seen in both the Food and Core sub-indices.

“Food prices as observed by the Food Sub-index increased at a faster pace in February partly driven by increases in prices of imported food items, the NBS stated e consumer price report.

“The imported food sub-index increased by 8.8 percent (year-on-year), the highest increase recorded since February 2013.”

The food sub-index rose by 9.4 percent (year-on-year), 0.2 percentage points from January.

According to Ayodeji Ebo, head investment research, Afrinvest Securities Limited, said this was expected given the depreciation of the Naira in January which pressured prices of imported products prior to the tactical devaluation of the currency in February following CBN’s closure of the official window. Slower growth in the Bread and Cereal group however, moderated food inflation in February, compared to other groups which rose faster in the month.

While most groups that contribute to the food sub-index increased at a faster pace during the month, the pace of increase in the Food Sub-index was however weighed upon by a slower increase in the Bread and Cereals group.

On a month-on-month basis, the highest price increases were recorded in the Fish, Meat, Vegetables and “Potatoes, Yams and Other Tubers” groups. The average annual rate of change of the Food sub-index for the twelve-month period ending in February 2015 over the previous twelve month average was 9.5 percent. The twelve month rate of change has held steady for nine consecutive months.

The Core sub-index also increased for the second consecutive month in February, rising 0.2 percentage points to 7.0 percent year-on- year, from 6.8 percent recorded in January.

Prices increased at a faster pace in most major non-food divisions except for the Recreational and Culture Division which increased at a slower pace

The strongest increases recorded in the “Furnishings & Household Equipment Maintenance” and “Restaurant & Hotels” divisions.

On a month-on-month basis, the Core Sub-index increased at the same pace for the second consecutive month at 0.7 percent. The highest increases were recorded in the “Appliances, articles and products for personal care”, and “Fuels and lubricants for personal transport equipment” groups amongst others.

According to analysts, the current high interest rate environment generated by policy responses to the exchange rate pressures and macroeconomic instability within the recent times will significantly affect businesses and weaken economic growth. However, a further increase in MPR may not result in moderating inflationary pressure in the economy but rather stoke it, with structural factors (cost push) being the major driver of inflation at the moment.