Recent revelation from the National Bureau of Statistics (NBS) that the Consumer Price Index (CPI) increased to 11.28 per cent in September from 11.23 per cent in August is a pointer to a creeping inflationary pressure that should not be ignored. The rise in the prices of goods and services after 18 months of decline means that the purchasing power of the average consumer is greatly eroded, just as it raises the anxiety that the monetary authorities may be compelled to increase the interest rate higher than the current 14 per cent.
None of the options is beneficial to the consumers. A tightening of the monetary policy or lending rate will adversely affect the cost of borrowing from the commercial banks.
According to the CPI report for September, increases were recorded in all the indicators, which determined the headline index. The 11.28 per cent for September is much higher than the CBN’s recommended ceiling of 9 per cent on inflation. The September inflation rate may have further diminished market expectations over interest rate cut any time soon. The NBS figures indicated that food inflation rose to 13.31 per cent in September from 13.16 per cent in August. This validates consumers’ complaint in recent times of rising food prices across the country.
In the month under review, core inflation stood at 9.80 per cent from 10.0 percent in the preceding month. Urban inflation rate increased to 11.70 per cent (year-on-year) in September from 11.67 per cent in August, while rural inflation rate also rose to 10.92 per cent within the review period from 10.84 per cent in August. The NBS data also showed that price increases vary from state to state across the country, with Kaduna State recording the highest inflation rate of 12.93 percent, followed by Ebonyi State with 12.86 per cent, Bayelsa State, 12.83 per cent. Cross River, Plateau and Ogun states, recorded the lowest rise in inflation headline of 8.42 per cent, 8.77 per cent and 9.22 per cent respectively. The statistical agency said average prices of food items and that of fuel influenced the inflationary pressure in the month under review.
Experts are of the view that the uptick in inflationary trend may continue in the months ahead, especially the rise in food prices. These and uncertainty ahead of the 2019 general election have decreased expectation that the CBN may review downwards the interest rate at the next meeting of the
Monetary Policy Committee (MPC). Recently, the CBN Deputy Governor, Dr. Joseph Nnanna, hinted that a hike in interest rate was likely in response to higher inflation and the forthcoming elections. Altogether, there are fears that the inflationary pressure will continue for the rest of the year. This could be worsened by any increase in the minimum wage. Government should address the critical factors responsible for inflationary pressures on the economy. All hands must be on deck to check inflation.
We recall that when inflation soared to an 11-year high in April 2016 following depreciation of the naira and the upward review in the price of petrol, the Federal Government released 10,000 tons of grains from the National Strategic Grain Reserve to counter increases in prices of food items. But such measure should only be an interim solution. What we need now is a holistic approach to check imminent food crisis. Failure to do this could have dire consequences.
Two years ago, the Minister of Agriculture, Chief Audu Ogbeh warned that the nation risked the possibility of starvation in the near future and high inflation if urgent steps were not taken to improve farming practices that will achieve higher productivity. That alarm may sooner than later catch up with Nigeria. The Government should take measures to boost food production. Current efforts to check flooding and the farmers/ herdsmen conflicts should be seriously pursued.
The CBN should put on hold the envisaged hike in interest rate. It is sad that while many Nigerians are asking for a downward review of the interest rates, the CBN is contemplating another hike. The MPR has remained at 14 per cent for two years. The fiscal and monetary authorities should design new strategies that will steer the economy on the right course.