Nigeria’s consumer price index, which measures the average change in the prices of goods and services consumed by people for day-to-day living over time, rose by 1.34 per cent to 13.22 per cent (year on year) in the month of August 2020, indicating a 0.40 per cent point rise from the rate (12.82 per cent) recorded in July, recent data from the National Bureau of Statistics (NBS) show.
The rise can be attributed to the recent chain of events around the economy, including the weakening of the local currency, which has gravely affected its internal purchasing power with external currencies taking the place of the domestic unit of exchange in the markets (especially the parallel market); as well as the pressures on the naira in the FX market. Also, the coronavirus pandemic and the continuing closure of the country’s borders are believed to be other factors, as the movement of goods across the borders has been put to a halt.
According to data from the statistician general’s office in Abuja, the federal capital, the headline index increased by 1.34 per cent in August 2020. This is 0.09 per cent higher than the rate recorded in July 2020 (1.25 per cent) on a month-on-month basis. The percentage change in the average composite CPI for the twelve months period ending August 2020 over the average CPI for the previous twelve months period was 12.23 per cent, representing a 0.18 per cent rise from 12.05 per cent recorded in July 2020.
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How does high inflation affect you or your business?
With the recent directive from the central bank to deposit money banks that interest on savings deposits shall be negotiated subject to a minimum of 10 per cent annually of the policy rate, it means that high inflation rate coupled with low interest rates on savings account might lead to interest on existing loans rising and may lead to borrowers’ inability to pay. This is because the interest on savings in banks is lower than the inflation rate.
Experts also say that with the high inflation profits of companies will be affected as value of money drops. There is also a suggestion of possible rumbling in labour union circle as demand for inflation reflective wages could come up.
Further analysis of the inflation report from NBS
On the other hand, the composite food index rose by 16 per cent in August 2020 compared to 15.48 per cent in July 2020; the rise was as a result of the increases in bread and cereals, potatoes, yam and other tubers, meat, fish, fruits, oils and fats and vegetables.
Meanwhile, Kogi (22.03%), Kwara (19.11%) and Edo (17.95%) recorded the highest rise in food inflation, while Gombe (14.33%), Kano (13.99%) and Bauchi (13.42%) recorded the slowest rise on annual comparison during the month of August 2020. On the other hand, Kogi (17.29%), Bauchi (15.77%) and Ebonyi and Yobe (14.71%) saw the highest rise in all items inflation, while Lagos (11.45%), Kwara (11.22%) and Abuja (11.17%) recorded the slowest rise year on year in headline inflation.