BY BUKOLA IDOWU, CHIBUZO UKAIBE |
Financial experts said yesterday that the February inflation figure of 17.33 per cent was inevitable due to the spate of insecurity in parts of the country, dwindling agricultural production and rising costs of energy.
They were reacting to the February inflation figure released by the National Bureau of Statistics (NBS).
According to the Consumer Price Index (CPI), the report for February 2021 released yesterday in Abuja, the NBS said that the inflation rate increased in February by 0.86 per cent to 17.33 per cent, from 16.47 per cent in the previous month of January.
It said that CPI increased by 17.33 per cent, year-on-year, in February.
But a Professor of Economics, Sheriffdeen Tella, of Olabisi Onabanjo University, Ago-Iwoye, Ogun State, said that the inflationary trend was expected because production in the agricultural sector was falling.
Tella said the production in the agricultural sector was dropping due to herdsmen/farmers crisis and banditry as well as bad weather.
He also said that the cost of production by manufacturers was rising as a result of hike in electricity tariff, petroleum products and depreciation of the naira.
On the way forward, Tella said that the government should take decisive action on the herdsmen/farmers rift and bandits’ activities now that the rainy season is here.
“Secondly, government should subsidise industries through tax relief, putting a stop to price hikes in electricity and fuel. They should also encourage consumption by paying salaries as and when due because production without corresponding consumption will discourage producers from production and expansion, which ultimately promote employment,” Tell added.
For his part, the chief operating officer, InvestData Ltd., Mr Ambrose Omordion, said the inflationary pressure in February was largely impacted by higher food prices due to the high cost of transportation, production and insecurity in the northern part of the country.
Omordion said that many farmers have been driven away from their farmlands as a result of insecurity in the North.
He said that the government needed to map out policies that would tackle insecurity in the country to boost confidence.
The high pump price of fuel and electricity tariff, he noted, also contributed to the development.
Also, analysts at Cordros Research, said that the figure reflected the effects of persistent conflict between farmers and herdsmen, particularly in the northern region of the country.
They posited the lingering impact of supply chain challenges and foreign exchange devaluation on food prices amid the partial reopening of the land borders contributed to the trend.
For Dr Mohammed Tukur, Head of Department of Economics, University of Maiduguri, the insecurity in the country, especially in the North, has devastated the nation’s economy and is partly to blame for the rising inflation.
According to him, the North is responsible for not less than 80% of the grains consumed in the country, but unfortunately farmlands in the region have been destroyed and thousands of farmers displaced.
“Borno in particular, before the insurgency, used to produce 95 percent of beans in the North, 80 to 90 percent of cotton produced in the North, and over 70 per cent of fish and cattle produced in the North, but with the insecurity has destroyed all of these. All of these things contributed to the rising inflation we are witnessing today,” he said.
In his reaction, Prof. Ademu Wada of the Department of Economics, University of Jos, said the insecurity in the country is to blame for the current inflation trend.
According to him, we have a situation where farmers are no longer safe to go to their farms to cultivate or harvest as a result, we are experiencing food insecurity and high costs of food stuff in the market today.
The director-general of Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf said: “There are many variables impacting domestic prices. These factors include transportation costs logistics challenges, exchange rate depreciation, forex liquidity issues, hike in energy prices, climate change, insecurity in many farming communities and structural bottlenecks to production.”
He stated that these are essentially supply side issues, saying, any mitigation measures would have to be situated in the context of these variables, adding that, the CBN had admitted that the potency of monetary policy instruments in tackling inflation is weak.
Yusuf further said: “Mounting inflationary pressures weakens purchasing power of citizens as real incomes are eroded, it accentuates pressure on production costs, it negatively impacts profitability, and undermines investors confidence.
To him, “It is not in all cases that high production costs can be transferred to consumers. The implication is that producers are also taking a hit. This is more pronounced where the demand for the product is elastic. These are products that consumers can readily do without.”
“Tackling inflation requires urgent government intervention to address the challenges bedevelling the supply side of the economy.”
The NBS report also noted that increases were recorded in all Classification of Individual Consumption by Purpose (COICOP) divisions that yielded the headline index.
“On month-on-month basis, the headline index increased by 1.54 per cent in February, this is 0.05 per cent rate higher than the rate recorded in January (1.49 per cent),” the report said.
Inflation rate in Nigeria rose to 17.33 per cent in February, 0.86 per cent points higher than the 16.47 per cent recorded in January, even as food inflation crossed to 21.79 per cent.
Inflation measures the rate at which prices of goods and services rise in the country and the latest figures released by the NBS yesterday shows a faster inflation figure compared to January figures.
According to NBS, headline inflation on month-on-month basis, increased by 1.54 per cent in February 2021, this is 0.05 per cent rate higher than 1.49 per cent recorded in January 2021.
The percentage change in the average composite CPI for the twelve months period ending February 2021 over the average of the CPI for the previous twelve months period was 14.05 percent, showing 0.43 per cent point from 13.62 per cent recorded in January 2021.
The urban inflation rate increased by 17.92 per cent (year-on-year) in February 2021 from 17.03 percent recorded in January 2021, while the rural inflation rate increased by 16.77 per cent in February 2021 from 15.92 per cent in January 2021
On a month-on-month basis, the urban index rose by 1.58 per cent in February 2021, up by 0.06 the rate recorded in January 2021, while the rural index also rose by 1.50 per cent in February 2021, up by 0.04 the rate that was recorded in January 2021 (1.46) per cent.
The corresponding 12-month year-on-year average percentage change for the urban index is 14.66 per cent in February 2021. This is higher than 14.23 per cent reported in January 2021, while the corresponding rural inflation rate in February 2021 is 13.48 per cent compared to 13.04 percent recorded in January 2021.
NBS, in the latest inflation report, noted that the rise in the food index was caused by increases in prices of Bread and cereals,
Potatoes, yam and other tubers, Meat, Food products, fruits, vegetable, fish and oils and fats.
The average annual rate of change of the Food sub-index for the twelve-month period ending February 2021 over the previous the twelve-month average was 17.25 percent, 0.59 percent points from the average annual rate of change recorded in January 2021 (16.66) per cent.
FG Services Debt With N315bn
Meanwhile, the federal government spent N351.98billion to service domestic debts between October and December, 2020, as a total of $243.88 million was expended in servicing external loans between January and December last year.
According to the latest data by the Debt Management Office (DMO), the majority of the debt servicing cost at the domestic market went to federal government bonds. A total of N239.455billion had been spent servicing the FGN Bond obligations between October and December last year.
Also, N65.171billion had been spent servicing the government obligations through the Nigeria Treasury Bills (NTB) while N331.428 million was expended on paying yields on the federal government Savings Bond.
Meanwhile, $243.882 million had been spent servicing Nigeria’s debt obligation outside the country. According to data released yesterday by the DMO, 45 per cent of the figure went to servicing the debt owed to multilateral organisations while commercial debt took up 41 per cent of the total debt servicing amount.
The cost of servicing debts owed to bilateral lenders took up 14 per cent of the total figure. A total of $108.66 million had been paid to service debt with multilateral agencies. Of this figure, $78.19million had gone to the International Development Association while $18.27 was paid to African Development Bank.
Total cost of servicing the 11 Eurobond and one Diaspora Bond raised by the country between January and December last year stood at $100.507million, while $34.676 million had been expended on servicing obligations with bilateral lenders.
Nigeria’s total public debt had risen by 2.1 per cent or N693 billion between September and December last year as public debt stock stood as at December 31, 2020 stood at N32.915 trillion according to the DMO. As at September 30, 2020, the total public debt of the country was N32.222 trillion.
NBS Report Faults FG’s Claims On Employment, Job Creation – PDP
Reacting to the latest inflation figure, the opposition Peoples Democratic Party (PDP) said the report by the NBS on escalated 33.3 per cent unemployment rate in the country was a direct confirmation that the much-orchestrated claims of massive job creation by the Buhari administrationa and the ruling All Progressives Congress (APC) were mere statistical hoax.
The PDP, in a statement yesterday, said the report by the NBS that no fewer than 21.7 million able-bodied Nigerians have lost their jobs and means of livelihood while many more have become underemployed under the APC misrule further showed the despairing and despondent situation that APC and its administration has brought to the nation.
The statement signed by the party’s national publicity secretary, Kola Ologbondiyan, said the rise in unemployment from the alarming 27.1 percent in Q2, 2020 to 33.3 percent in Q4 2020, despite the bogus claims of the APC administration, confirms that indeed, there is no hope in sight under the Buhari Presidency and the APC.
Ologbondiyan: “It is clear that the direct cause of the escalating unemployment is the incompetence as well as the widespread corruption and treasury looting in the Buhari administration, where APC leaders are reported to have looted over N15 trillion, which should have been used to create wealth, develop our country and provide jobs for our citizens.
“It is rather distressing that, as shown in the NBS report, that unemployment rate among young and very enterprising Nigerians, within the age of 15 to 34 years, had risen to 42.5 percent; a revelation that put a lie to claims by the Buhari administration, of mass employment, job opportunities and economic empowerment of our youths.
“It is now obvious that under President Buhari and the APC, the Federal Government created jobs only in their fake statistics while in reality, they are taking no concrete steps to empower our hard working citizens.
“More frustrating is that the APC and its administration have promoted a huge racket where Nigerians are deceived to pay for non-existent jobs in ministries, department and agencies at alarming costs, ranging between N2 million to 6 million, depending on the agency.
“The APC administration, in its corruption, is allowing such evil enterprise, while millions of Nigerians are weeping on the streets after being defrauded of their hard-earned money, lifesaving and pensions of aged parents by job fraudsters in official circles”.