Although January’s inflation showed a slight decline to 15.60 percent from 15.63 percent in December 2021, inflationary pressures have continued to squeeze consumers’ pockets, according to FBN Quest. In December, there was an out-of-trend increase in inflation which was attributed to price upticks associated with the year-end holiday season, nevertheless, base effects have remained positive.
Despite the inflation rate declining marginally by 0.03 percent year on year, there has been an increase in food prices, Premium Motor Spirit (PMS), transportation, and even the price of Gas. Food inflation, the greatest driver of the elevated headline inflation reading, slowed to 17.13 percent year on year last month and was driven by increases in bread and cereals, potatoes, yam, and other tubers.
In the selected food price watch report for January, a separate report by the National Bureau of Statistics (NBS), all 43 food items surveyed recorded price increases averaging 26.1 percent. Local food production has been a priority for the government as it aims to “achieve self-sufficiency, attract investments, create jobs and enhance the livelihood of farming families”. However, Insecurity remains the single biggest limitation of the government’s investment in the agriculture sector.
Imported food inflation recorded a 6 basis points increase to 17.4 percent last month, reflecting importers’ persistent challenge with foreign exchange availability. The PMS price watch shows that the average price paid by consumers increased by 1.4 percent year on year and by 0.4 percent month on month to N166.40 per liter in January from N164.09 in the previous month. Abia, Kebbi, and Cross River recorded the highest average prices in the month, while Borno, Adamawa, and Lagos posted the lowest average PMS prices.
The importation of petrol with high methanol content in recent weeks prompted an investigation by the House of Representatives Committee on Petroleum Resources (downstream), following a resolution of the House. This led to a short supply of PMS and a resultant hike in its price to as high as N600 per liter in some states. The NNPC has disclosed plans to restore supply by boosting incoming PMS supplies, recertifying and releasing in-country PMS stock, and enhancing distribution management.
The transportation segment, which accounts for 6.5 percent of the basket, again posted a price increase of 15.1 percent year on year and 1.3 percent month on month last month. The NBS transport fare watch shows that the increase in the average fare paid by commuters for bus journeys within cities rose by 1.2 percent month on month and 35.3 percent year on year on average in January. The NBS report on Liquefied Petroleum Gas (LPG) prices also reveals that the average cost of refilling a 12.5kg cylinder rose by 1.1 percent month on month and by 77.5 percent year on year to an average of N7,413 in January, from N7,332 in December.
At its meeting last month, the Monetary Policy Committee (MPC) voted unanimously to hold all policy parameters constant. The committee believed that its current pro-growth approach is desirable because, unlike industrialized countries that are primarily concerned with inflation, Nigeria is confronted with the dual issues of inflation and output growth.