Inflation Rises By 0.09% To 21.91% Amid Cash Crunch

Nigeria’s search for moderate inflation has hit the rocks with headline inflation rising above prediction to a record 21.91 percent in February, signalling a possible hike in monetary rates when the Monetary Policy Meeting of the Central Bank of Nigeria (CBN) meets next week.

A report by the National Bureau of Statistics (NBS) yesterday showed that inflation rose above the January 2023 figure of 21.82 percent, showing an increase of 0.09 percent points when compared to January 2023 headline inflation rate.

General election spending and scarcity of banknotes that caused much economic hardship for individuals and small-scale businesses were responsible for the rise in inflation during the month under review.

Nigeria held its presidential and National Assembly elections in February, with governorship and state House of Assembly elections coming up on March 18.

Currency scarcity due to redesigning of higher-denominations of the banknotes and the surge in internet banking activities at high costs combined to jack up the inflation figures. Many Nigerians have had to pay more for financial transactions due to the cash crunch that engulfed the entire nation.

On a year-on-year basis, the headline inflation rate was 6.21 percent points higher compared to the rate recorded in February 2022, which was 15.70 percent. This shows that the headline inflation rate (year-on-year basis) increased in February 2023 when compared to the same month in the preceding year (i.e. February 2022).

The contributions of items on a class basis to the increase in the headline index are: bread and cereal (21.67 percent), actual and imputed rent (7.74 percent), potatoes, yam and other tubers (6.06 percent), vegetable (5.44 percent) and meat (4.78 percent).

The report published yesterday showed that on a month-on-month basis, the percentage change in the All-Items Index in February 2023 was 1.71 percent, which was 0.16 percent points lower than the rate recorded in January 2023 (1.87 percent).

This means that in February 2023, on average, the general price level was 0.16 percent lower relative to January 2023. Urban inflation rate in February 2023 was 22.78 percent, a 6.53 percent points higher compared to the 16.25 per cent recorded in February 2022.

On a month-on-month basis, the urban inflation rate was 1.85 percent in February 2023. This was 0.13 percent points lower compared to January 2023 (1.98 percent). The corresponding twelve-month average for the urban inflation rate was 20.45 percent in February 2023. This was 3.16 percent points higher compared to the 17.29 percent reported in February 2022.

On the other hand, rural inflation rate in February 2023 was 21.10 percent on a year-on-year basis. This was 5.92 percent points higher compared to the 15.18 percent recorded in February 2022. On a month-on-month basis, the rural inflation rate in February 2023 was 1.58 percent, down by 0.19 percentage points compared to January 2023 (1.77 per cent).

The corresponding twelve-month average for the rural inflation rate in February 2023 was 19.33 percent. This was 3.15 percent points higher compared to the 16.18 percent recorded in February 2022.

The percentage change in the average Consumer Price Index (CPI) for the twelve-month period ending February 2023 over the average of the CPI for the previous twelve-month period was 19.87 percent, showing a 3.15 per cent points increase compared to 16.73 percent recorded in February 2022.

The increases were recorded in all COICOP divisions that yielded the headline index.