Food prices moderates inflation to 17.01%, Kogi in highest rate

The National Bureau of Statistics, NBS, said headline inflation dropped  to 17.01 per cent in August, 2021 following slower pace of increase in food prices.

This represents a 0.37 percentage point decline when compared to 17.38 per cent recorded in July.

Meanwhile, analysts at Cordros Securities Limited have predicted that:    “On a balance of factors, we expect the deceleration on consumer prices to be maintained and project headline Consumer Price Index, CPI at 1.03 per cent Month-on-Month, M-o-M September, with the high base in the prior year cascading into a 52 bases points, bps, decrease in  Year-On-Year, YoY, inflation rate to 16.49 per cent.”

In its CPI report released yesterday, NBS said that food index slowed by 1.03 percentage points to 20.3 per cent   YoY    as against July 21.03 per cent YoY    due to increases in prices of bread and cereals, milk, cheese and egg, oils and fats, potatoes, yam and other tuber, food product ,meat , coffee, tea and cocoa. 

The report showed that Kogi State recorded the highest, YoY, food inflation with  29 per cent followed by Oyo State with 24 per cent.

The Bureau stated: “The CPI which measures inflation increased by 17.01 percent (YoY) in August 2021. This is 0.37 percent points lower than the rate recorded in July 2021 (17.38) per cent. Increases were recorded in all COICOP divisions that yielded the Headline index.

“The urban inflation rate increased by 17.59 per cent (YoY) in August 2021 from 18.01 percent recorded in July 2021, while the rural inflation rate increased by 16.43 percent in August 2021 from 16.75  per cent in July 2021.

“On a month-on-month (MoM) basis, the urban index rose by 1.06 percent in August 2021, up by 0.08 the rate   recorded in July 2021 (0.98), while the rural index also rose by 0.99 percent in August 2021, up by 0.12 the rate that was recorded in July 2021 (0.87) percent.” On food index it stated:”The composite food index rose by 20.30 percent in August 2021 compared to 21.03 percent in July 2021. 

“This rise in the food index was caused by increases in prices of bread and cereals, milk, cheese and egg, oils  and fats, potatoes, yam and other tuber, food product, meat, coffee, tea and cocoa.”

Decline too marginal  – Muda Yusuf

Commenting on the inflation  report, Dr Muda Yusuf, Economist and Former Director General, Lagos Chamber of Commerce and Industries, LCCI, said “The marginal decline in the August headline inflation by 0.37% to 17.01percent is noteworthy.   Equally noteworthy is the consistency of the composite price index over the past four months.   

“But these declines remain very marginal and raises the question of materiality.   Headline inflation at over 17 percent is still quite high and remains a cause for concern. 

“The major inflation drivers have not abated.  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. 

“These are basically supply side issues.   Any mitigation measures would have to be situated in the context of these factors.

“The heightened fiscal deficit financing by the CBN could be another potent inflation driver.   The financing of fiscal deficit has been elevated to disturbing levels with huge implications for money supply and consequent effect on inflation.   CBN financing of deficit is high powered money and therefore very inflationary.”

Credit: Vanguard