Food prices crashes in spite rise in inflation
Data from the National Bureau of Statistics, NBS, have shown that foodstuff prices have been on a steady decline, despite the rise in inflation rate being witnessed in Nigeria in the last few months.
The Monetary Policy Committee of the Central Bank of Nigeria had recently warned that the country may drop into another recession, as the economy is already showing signs of weakness.
Though the Nigerian economy exited recession in 2017, the MPC fears that weak economic fundamentals currently being shown by the economy were putting the country’s exit from recession under threat.
Despite these indices, the National Bureau of Statistics reported that though inflation rate had risen to 11.23percent in August, up from the 11.14percent recorded in July this year, the decline in prices of foodstuff showed that something else may have been responsible for triggering upward surge in inflation rate.
Data from NBS showed that in August 2018, the average price of piece of agric egg medium size (price of one) fell by 2.62percent to N41.79 in August 2018 from N41.22 in July 2018.
The average price of 1kg of rice (imported high quality sold loose) decreased year-on-year by -2.43percent and increased month-on-month by 1.14 percent to N375.02 in August 2018 from N370.79 in July 2018.
Similarly, the average price of 1kg of yam tuber decreased year-on-year by -14.68percent and month-on-month by 4.32percent to N292.97 in August 2018 from N280.83 in July 2018.
The Central Bank Governor, Godwin Emefiele, had told newsmen that there was a fresh threat of recession as the economy recorded growth rate of 1.95percent and 1.5percent during the first and the second quarters of this year, respectively.
He noted that the slowdown emanated from the oil sector, with strong linkages to employment and growth.
He said the late implementation of the 2018 budget, weakening demand and consumer spending, rising contractor debts, and low minimum wage were some of the risks to output growth, among other factors
Emefiele stated, “The MPC observed that despite the underperformance of key monetary aggregates, headline inflation inched up to 11.23percent in August 2018 from 11.14percent in July 2018.
“The near time upside risks to inflation remain the dissipation of the base effect expected from 2019 election related spending, continued herdsmen attacks on farmers and episode of flooding, which destroyed farmlands and affected food supply ultimately.
“In this regard, the committee urges the fiscal authorities to sustain implementation of the 2018 budget to relieve the supply side growth constraints so that they can address the flooding, which has become perennial on a permanent basis.
He added that, “The committee was concerned that the exit from recession may be under threat as the economy slid to 1.95percent and 1.5percent during the first and the second quarters of 2018, respectively.
“The committee noted that the slowdown emanated from the oil sector with strong linkages to employment and growth.”
To stimulate economic activities, the committee suggest that the effective implementation of the 2018 Federal Government budget and policies that would encourage credit delivery to the real sector of the economy. This might boost aggregate demand, stimulate economic activity and reduce unemployment in the country.
They urged government to take advantage of the current rising trend in oil prices to rebuild fiscal buffers, strengthen government finances in the medium term and reverse the current trend of decline in output growth.
The MPC expressed concern over the potential impact of liquidity injection from election-related spending and increase in federal allocations, which are rising in tandem with increase in oil receipts.