Inflation rate hits 9.2 per cent, Naira slide continues
A MIX of situational factors may have posed fresh challenges to the nation’s economic managers, as headline inflation hit 9.2 per cent, while the naira sustained sliding profile at the foreign exchange market.
The naira’s free fall, yesterday, hit an all-time high of N241 per dollar at the parallel market, with some Bureau De Change operators also making a brisk business from the development.
Specifically, The Guardian’s investigation across the Lagos metropolis, where street trading of foreign currencies goes on, showed that naira exchanged for between N239 and N241, while the relatively inaccessible official rate remained stable at N196.95/$.
According to the National Bureau of Statistics (NBS), the new inflation rate, contained in its Consumer Price Index (CPI) report for June, has outstripped the target band of six to nine per cent, set by the Central Bank of Nigeria (CBN) for the fiscal year.
The NBS report released yesterday showed that the headline inflation for June – measured year-on-Year (Y-o-Y) – was estimated at 9.2 per cent, 20 basis points (bps) higher than nine per cent reported in May.
The new inflation figure marks the seventh consecutive increase in the headline rate since December 2014 and the highest headline rate recorded since July 2013.
Specifically, the food index (farm produce and processed food) rose by 20bps year-on-year (Y-o-Y) to double digit level of 10 per cent from 9.8 per cent in May and core index (all items less farm produce) increased by 8.4 per cent Y-o-Y, marginally higher than that of May.
However, Month-on-Month (M-o-M) increase in headline inflation softened to 0.9 per cent, 20bps less than 1.1 per cent recorded in May.
The rise in food sub-index of the June CPI was attributable to the irregularity of supply of Premium Motor Spirit (PMS) or petrol.
On a significant note, all groups, which contribute to the food sub-index, such as vegetables, fish, bread and cereals, among others, with the exception of oils and fats, potatoes, yams and tubers, were reported to have increased at a faster pace during the period under review.
This 20 bps M-o-M rise was expected, given the scarcity of petrol in the period, which translated into higher transportation costs of delivering goods to their respective markets, the year’s late rains which led to the late harvest period and reduced availability of vegetables during this rainy season, also increased the pressure on the food sub-index.
In addition, the recent move by the Central Bank of Nigeria (CBN) to further stabilise foreign exchange rate and conserve the reserve may, however, pressure inflation rate northwards.
This is given the fact that CBN’s ban on importers of 41 (mostly food and necessities) items from gaining access to the official foreign exchange markets and the continued fuel scarcity are expected to further the push upwards.
The naira-dollar exchange relationship, had settled at N236.5/$ at the parallel segment, although the development was not a surprise given the prohibition list of 41 items, which shifted demand by a large extent to the parallel.
The weekend’s close, however, represented a 0.9 per cent fall when measured on week-on-week to N232/$, while the Nigerian Interbank Market, when measured on week-on-week, traded flat at N199.05/$.
On Monday, the sliding profile was sustained across the parallel markets as it inched further to N237.
The President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, in a note to The Guardian, deplored the huge fall of the currency and blamed it on the recent policy shift by the apex bank.
Listing other reasons for the steady decline, he said the “over regulation” of the bureau de change and financial markets, increased naira liquidity chasing fewer dollars, intensified hoarding and speculative activities, inability of banks to meet legible and legitimate demands and tightening policies of CBN.
But for Prof. Pat Utomi, the dwindling fortunes of the local currency are being driven by perception and speculations, not just about the fundamentals of the economy.
According to the political economist, while it is normal to expect a shift of the demand pressure for foreign exchange from the official window to the parallel, given the prohibition on 41 items, more of the pressure is a result of buying more than what is needed.