Inflation Hits 26-year High at 31.70% Amid Higher Food, Energy Prices

* Analysts say monetary policy alone can’t tackle rising prices, want CBN to focus on price stability 

*DMO: Report on appointment of Eurobond transaction advisers false

James Emejo  in Abuja and Nume Ekeghe in Lagos

The Consumer Price Index (CPI) which measures the rate of change in prices of goods and commodities, increased by 1.80 per cent to 31.70 per cent in February compared to 29.90 per cent in the preceding month, the National Bureau of Statistics (NBS) stated yesterday. This is the highest inflation rate in 26 years.
However, yesterday, the Debt Management Office (DMO) debunked the report that it had appointed transaction advisers for a potential Eurobond issuance.
According to the CPI Report for the period under review, year-on-year, headline inflation rose 9.79 per cent compared to 21.91 per cent in February 2023.
This comes as analysts said classical economic tools were limited in taming inflation in the country’s largely informal economy, stressing that several other factors fuelling inflation are outside the control of monetary policy – particularly insecurity and high prices of petroleum products among others.

They argued that inflation was largely cost-push driven by rising importation costs as well as structural issues – all of which increases the cost of production.
They therefore, urged the Central Bank of Nigeria (CBN) to focus more on achieving price stability to boost confidence in the Naira, adding that increasing the Monetary Policy Rate (MPR) alone would not stem inflation.
However, food inflation rose to 37.92 per cent, year on year, representing an increase of 13.57 per cent when compared to 24.35 per cent in February last year.
The rise in the food index on an annual basis was attributable to increases in prices of bread and cereals, potatoes, yam and other tubers, fish, oil and fat, meat, fruit, coffee, tea, and cocoa.

Month-on-month, food inflation increased to 3.79 per cent, representing 0.58 per cent rise over 3.21 per cent in January.
On the other hand, core inflation, which excludes the prices of volatile agricultural produce and energy rose by 6.76 per cent to 25.13 per cent year on year in February compared to 18.37 per cent in February 2023.  
The rise in the core index was attributed to the highest increases in prices of passenger transport by road, actual and imputed rentals for housing, medical services, pharmaceutical products, among others.

Month-on-month, core inflation however, declined to 2.17 per cent in February compared to 2.24 per cent in the preceding month.
Urban inflation also rose to 33.66 per cent year on year, or 10.87 per cent higher than 22.78 per cent recorded in February 2023. On a monthly basis, the urban index increased to 3.17 per cent in February which was 0.45 per cent higher than 2.72 per cent in January.
Similarly, rural inflation rate increased to 29.99 per cent year-on-year, over 21.10 per cent in February 2023. Month-on-month, the index also rose to 3.07 per cent, compared to 2.57 per cent in the preceding month.

At states level, all item inflation was highest in Kogi (37.98 per cent), Oyo (36.60 per cent), and Bauchi (35.62 per cent, while Borno (26.28 per cent), Taraba (26.72 per cent) and Benue (27.40 per cent) recorded the slowest rise in deadline inflation on a year-on-year basis.
Month-on-month, however, the highest increases were recorded in Kwara (6.42 per cent), Kebbi (4.64 per cent), and Adamawa (4.46 per cent), while Katsina (1.93 per cent), Cross River (1.98 per cent) and Benue (2.33 per cent) recorded the slowest rise.
Year on year, food inflation was highest in Kogi (46.32 per cent), Rivers (44.34 per cent), and Kwara (43.05 per cent), while Bauchi (31.46 per cent), Plateau (32.56 per cent), and Taraba (33.23 per cent) recorded the slowest rise.
Month on month, however, the food index was highest in Adamawa (5.61 per cent), Yobe (5.60 per cent), and Borno (5.60 per cent), while Cross River (2.08 per cent), Niger (2.56 per cent), and Abuja (2.60 per cent) recorded the slowest increase. Speaking in an interview with THISDAY,
Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng said, “It’s obvious that classical economic tools are limited in taming inflation in this largely informal economy.
“The nature of inflation in Nigeria has generally been cost-push driven by rising importation costs as well as structural issues, which increases the cost of production.

Monetary policy alone cannot tackle Nigeria’s soaring inflation.”
He said, “However, the CBN must focus on price stability as a way of restoring confidence in the Naira. Raising interest rates may be to the detriment of domestic production, but it also allows for increased foreign investment.”
Also, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, emphasised that there was a limit to what monetary policy could achieve in the present circumstance.

He told THISDAY, “This simply means that many other factors outside the control of monetary policy are also responsible for the high inflation rate.
“CBN is not in control of insecurity in the country. They are not in control of high petroleum product prices. They are not in control of the lack of electricity power and a myriad of other factors. It will, therefore, take a concerted effort to curb the inflation rate. Otherwise, it will continue to rise.”
Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, also said the uptick in inflation had further shown that increasing MPR alone will not stem inflation.

He said, “The other major factors affecting inflationary trend are still persisting. The rate of food inflation is higher and the fluctuating value of the Naira coupled with dwindling economic activities has given rise to high cost of goods and services which will also impact inflation.
“The high interest rate occasioned by increase in MPR is not also helping the manufacturing sector to increase productivity. The resultant effect of rising inflation is reduced purchasing power and a struggling economy.”

Meanwhile, the DMO in a statement yesterday, explained that any prospective Eurobond issuance by the federal government of Nigeria in the international capital market would be subject to the endorsement of the Federal Executive Council (FEC) and the receipt of Resolution from the National Assembly (NASS), as outlined in the Fiscal Responsibilities Act, 2007, and the Debt Management Office (Establishment, Etc.) Act, 2003.
It pointed out that presently, the DMO has not obtained the necessary approvals from the FEC nor the Resolution from the NASS for any Eurobond Issuance.
It stated: “The DMO would like to clarify that recent news reports suggesting the appointment of Transaction Advisers for a potential Eurobond issuance are inaccurate.

The appointment of Transaction Advisers by the DMO is done in accordance with the provisions of the Public Procurement Act, 2007 and is subject to the approval of the FEC.
“Also, the Issuance of Eurobonds by the Federal Government of Nigeria in the International Capital Market is subject to the approval of the FEC and receipt of the Resolution of the National Assembly (NASS) in accordance with the provisions of the Fiscal Responsibilities Act, 2007 and Debt Management Office (Establishment, Etc.) Act, 2003. Currently, the DMO has not received the requisite approvals from the FEC and Resolution of the NASS for any Eurobond Issuance.”
“We encourage the public to rely on official statements from the DMO for accurate updates on Nigeria’s debt management activities.”