The consumer price index, (CPI) released by the National Bureau of Statistics (NBS) yesterday, revealed that Nigeria’s inflation hit an all-time high of 14.23 per cent in October, 2020 (year-on-year). This is 0.52 percent points higher than the rate recorded in September 2020 which is 13.71 per cent.
According to the report, the states with the highest inflation rate are Zamfara State (with a 17.69% increase), Sokoto State (17%), Ebonyi (16.91%), Bauchi (16.73%), and Plateau State (16.69%). While states with low measures includes Cross River (11.5%), followed by the federal capital, Abuja (11.84%), Lagos (11.95%), Ondo (12.33%) and Kwara State (12.5%).
The composite food index also rose by 17.38 percent in October 2020 compared to 16.66 percent in September 2020. This is said to be caused by rise in prices of Bread and cereals, Potatoes, Yam and other tubers, Meat, Fish, Fruits, Vegetable, alcoholic and food beverages and Oils and Fats.
The ”All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 11.14 percent in October 2020, up by 0.56 percent when compared with 10.58 percent recorded in September 2020.
The highest increases were recorded in prices of Passenger transport by air, Hospital and Medical services, Passenger transport by road, Pharmaceutical products, Motor cars, Vehicle spare parts, Maintenance and repair of personal transport equipment, Hairdressing salons and personal grooming establishments, Miscellaneous services relating to the dwelling, Paramedical services and shoes and other footwear.
What does all of this mean?
Nigerian inflation has accelerated for a 14th straight month in October and the rise was the highest inflation rate since February of 2018
A rise in the inflation rate means prices are rising at a faster rate. This indicates a persistent decrease in the purchasing power of consumers. Inflation is always a destroyer of economies.
It has strict consequences on producers, consumers, and Nigerians generally.
SME owners are always on the receiving end of high inflation. If you are an Entrepreneur or you run a business, there is a high probability that you will be unable to sustain operations when prices skyrockets. For instance, prices of energy and raw materials may be beyond reach. Ultimately, prior investments in fixed assets are turned into sunk costs.
Civil servants and salary earners are also not left out. Their wages are not increased with the persistent increases in prices. They, therefore, will have to suffer higher cost of living.
Central bank will most likely increase interest rates to moderate the inflation rate and this will cause greater uncertainty amongst business. It might lead to lower investment.
Inflation may also cause a depreciation in the exchange rate.
Basically, the poverty level in Nigeria will accelerate since rising inflation shows low purchasing power when there is no compensatory adjustment in incomes of households or salaries of workers.
This becomes a worry especially at a time when the Nigerian economy is on the verge of another recession, characterized by increases in price of major food items (due border closure, attacks on farmers in some states) and rise in service fees.