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  • Why inflation will persist in months ahead, as March hits 18.17% — Analysts
  • Inflation, Nigeria
    inflation

    *As  rising food prices spike inflation to 4-year high
    *Intervention needed in supply side of economy – LCCI

    By Yinka Kolawole, Nkiru Nnorom & Elizabeth Adegbesan

    Analysts in the financial sector of the economy have projected continuous inflationary pressure in coming months, as surging food prices pushed headline inflation to a 4-year high of 18.17 percent in March 2021. The February figure was 17.33 percent.

    They cited food insecurity, foreign exchange (FX) scarcity and high costs of importation, shortage in food supply due to planting season and rise in gasoline prices as some of the leading causes of the inflationary pressure.

    In its consumer price index (CPI) report for March 2021 released yesterday, the National Bureau of Statistics (NBS) said: “The CPI which measures inflation increased by 18.17 percent (year-on-year) in March 2021. This is 0.84 percent points higher than the rate recorded in February 2021 (17.33 percent).

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    “On month-on-month basis, the headline index increased by 1.56 percent in March 2021. This is 0.02 percentage points higher than the rate recorded in February 2021 (1.54 percent).”

    NBS also revealed that the composite food index rose to 22.95 per cent in March compared to 21.79 per cent in February.

    On a month-on-month basis, the food sub-index increased to 1.90 per cent in March, up by 0.01 per cent points from 1.89 per cent recorded in February.

    “Composite food index rose by 22.95 percent in March 2021 compared to 21.79 percent in February 2021. This rise in the food index was caused by increases in prices of Bread and cereals, Potatoes, yam and other tubers, Meat, Vegetable, Fish, Oils and fats and fruits.

    “On month-on-month basis, the food sub-index increased by 1.90 percent in March 2021, up by 0.01 percent points from 1.89 percent recorded in February 2021,” NBS stated.

    Commenting on the development, analysts at United Capital Management Plc, said: “Looking ahead, our outlook for inflation remains grim. Our stance is informed by unabating pressures on food prices resulting from several supply-side constraints. Clearly, food insecurity problems in the country have not subsided, and this continues to be exacerbated by FX scarcity and high costs of importation.

    “Also, we note that as we enter the planting season, supply shortages are expected to garner pace, which could consequently place further pressure on prices.

    “Furthermore, an increase in energy prices is likely in H2-2021 (second half 2021). Surely, a rise in gasoline prices will contribute to the index’s inflationary pressures, as it will feed into the transportation and logistics costs on the food index.”

    In his reaction, Director General, Lagos Chamber of Commerce and Industry (LCCI),  Dr Muda Yusuf, stated: “Tackling inflation requires urgent government intervention to address the challenges bedevilling the supply side of the economy.

    “The key drivers of the mounting inflation are currency depreciation, acute illiquidity in the foreign exchange market, rising transportation costs, agricultural output disruptions caused by growing insecurity, logistics challenges, hike in energy prices, climate change, and structural bottlenecks to production.

    “These are essentially supply side issues. The major issues are cost and output related. The solution therefore would have to be situated in the context of these causal factors.”

    Also commenting, Victor Chiazor, Managing Director, FSL Securities Limited, said:  “The rise in inflation was clearly anticipated given the current economic statistics in play. The continuous rise in the cost of transportation, volatility around the exchange rate, the rise in the price of foods stuff which further triggered a rise in the composite food inflation in March remain visible pressures which are not likely to disappear in the immediate.

    “Going forward, we may not see that much rise in inflation like we have seen in the last three months on the back of rising interest rates across the fixed income space which would help mop up excess liquidity in the system.

    “However, if the issues around production / manufacturing, issues around FX volatility and issues around the high cost of transportation are not managed, we may not see a decline in the level of inflation as the rising cost of goods and services will continue to force inflation figures higher.”

     

    The post Why inflation will persist in months ahead, as March hits 18.17% — Analysts appeared first on Vanguard News.


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