In March 2024, Nigeria witnessed an unprecedented food inflation rate of 40 percent; no thanks to the sustained rise in prices of staple food items in the market.
The development according to economists and financial analysts would see the purchasing power of the average Nigerian pressured and linger for some months before returning to normal.
Beyond the 31.7 percent recorded in February, the food inflation drove the headline inflation rate to 33.2 percent last month.
The figures released yesterday by National Bureau of Statistics, NBS, in its Consumer Price Index, CPI, report for March 2024, represented a 2.09 and 1.5 percentage points increases month-on-month.
But the analysts see a wider headline inflationary rise in this month to 34.6 percent, representing a 2.4 percentage month-on-month rise resulting from the recent hike in electricity tariff.
Analysts at a Lagos-based investment house, CardinalStone Finance Limited, pointed out that with the recent drastic hike in electricity tariff, further inflationary upswing should be expected.
According to the investment house: "The inflation outlook is biased to the upside, a consequence of the recent implementation of a new electricity tariff. For context, the Nigerian Electricity Regulatory Commission (NERC) has hiked the price for Band A customers from N68 to N225 per kilowatt hour.
"Nevertheless, we see some downside risk from the recent currency sustainability. Overall, we project inflation to print 34.6% in April 2024."
On their part, Alpha Morgan Capital projects that, "Inflation will further increase but at a continuously slower rate. We tie this prediction primarily to the recent monetary interventions by the Central Bank of Nigeria in mopping up excess liquidity, curbing volatile exchange rate movement through various aggressive currency interventions, government fiscal policies, such as agricultural interventions, among others.”
OPS also observed that the persistent rising inflation could sound the death knell for small businesses in the country, leading to consequential loss of jobs and worsened insecurity.
Meanwhile, the Director General of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Sola Obadimu, agreed that persistent rising inflation is bad for business as well as for individuals.
"It erodes income in value terms and purchasing power becomes weaker for both individuals and businesses. Inventories will continue to grow.
"It is bad for planning purposes and breeds growing uncertainty. Cost of doing business continues to grow leading to higher cost of goods. It’s cyclical.
“Even when businesses or individuals tend to earn higher income, the value (in real terms) becomes lower.”
The President of Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, also acknowledged that the development will worsen the survival of small businesses.
"The new and rising inflation rate, affecting largely food, essential commodities, raw materials, electricity and alternative power generation, and transportation among others, will continue to worsen the survival and growth of SMEs. It will, no doubt, squeeze out the meager working capital of SMEs and make us more vulnerable to extinction.
“Not all costs can be passed to the consumers but even at that, certain costs will be passed onto them, and since they also have had their disposable income eroded by inflation, sales of goods and services of SMEs will drastically drop. For an average citizen, their standard of living and welfare will significantly drop too.
“More Nigerians will suffer from hunger, and lack of access to basic necessities and amenities, worse of it is health and medical needs.
“Overall, the implications of this on SMEs is that many more businesses will die off and become ailing, job losses will increase as many more businesses will lay off workers.
“There will be an increase in bad loans as more SMEs will be unable to fulfill their loan obligations leading to decreased access to funding from banks that will be more averse to lending to SMEs particularly with the increased interest rate, now coupled with inflation.
“More insecurity will prevail in the land for many will look for alternative illegal ways of survival. More will migrate in the name of Japa.
“The extinction of more businesses will open doors for imported products to take their space which eventually will also stress the Naira exchange rate," he said
On food inflation the bureau said: “The food inflation rate in March 2024 was 40.01 percent on a year-on-year basis, which was 15.56 percentage points higher compared to the rate recorded in March 2023 (24.45 percent).
"The rise in Food inflation on a year-on-year basis was caused by increases in prices of the following items garri, millet, akpu uncooked fermented (which are under the bread and cereals class), yam tuber, water yam (under potatoes, yam, and other tubers class), dried fish sadine, mudfish dried (under Fish class), palm oil, vegetable oil (under Oil and Fat), beef feet, beef head, liver (under Meat class), coconut, water melon (under Fruit Class), Lipton tea, Bournvita, Milo (under coffee, tea and cocoa class)," the bureau submitted.
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