The headline inflation increased year on year to 11.61% in October 2019, from 11.24% in September 2019, data released by the Nigerian Bureau of Statistics (www.nigerianstat.gov.ng) shows.
The spike in general increase in prices of goods and service was informed by the rise in food index. On month on month comparison, headline inflation rose to 1.07% from 1.04% in September 2019.
Decomposing the Headline consumers’ price index (CPI), the food index rose to 14.09% from 13.51% in September 2019, while on month on month, it increased to 1.33% from 1.30% in September 2019.
Conversely, the Core index declined by 6 basis points (bps) from 8.94% in September 2019 to 8.88% in October 2019 while monthly comparison shows it prints 0.74% from 0.89% in September 2019.
Headline inflation increased by 37 basis points bps to 11.61% in October 2019 primarily on account of the price increase in food index.
The food index rose to 14.09% from 13.51% in September 2019, a record high from 14.80% seen in April 2018.
Analysts at WSTC Securities say the sustained land border closure, which commenced in August 2019, informed the persistent growth in the food index.
“We scale down to two factors which we believe have considerably impacted the prices of food in recent times.
First, domestic capacity constraint and ripple effect from farmers/herdsmen crisis were contributory factors.
Analysts said that the border closure disrupted food supplies in which the country relies heavily on imports to meet local demand.
Such food items include rice, groundnut oil, frozen chicken, tomatoes, and fish, among others.
For instance, according to the KPMG Rice Industry Review 2019, only about 57% of the 6.7 million metric tonnes of rice consumed in Nigeria annually is locally produced.
It is observed that limited domestic capacity to absorb the excess demand amid the land border closure led to price increases across several commodities; particularly on those Nigeria is yet import-dependent.
Analysts at WSTC Securities believe that the insurgency of the farmers/herdsmen crisis in the primary food producing state last year cum earlier this year significantly curtailed farmers/domestic output.
“We believe that the effect went unnoticed due to the import substitution, but which has become evident following the border closure.
“Given government willingness to leave the land border closed until January 30, 2020, we expect higher inflationary readings in the coming months on the back of limited domestic capacity to absorb demand”, analysts said.
WSTC reckoned that food inflation will continue to inform the Headline readings.
Food inflation increased year-on-year by 58 bps to 14.09% in October 2019 from 13.51% in September 2019.
Month-on-month, the index rose to 1.33%, relative to 1.30% recorded in September 2019.
The increase recorded in the index was contributed by price increases in bread & cereals; fish; meat; potatoes & other tubers; vegetables; and oil & fats.
The major price increases were recorded in Cleaning, Repair and Hire of Clothing; Glassware, Tableware and Household Utensils; Garment; Major Household Appliances; Repair of Household Appliances; and Hospital Services.
