Nigeria’s Inflation Rate Reaches 14.23 Percent in October, Above CBN Forecast

Nigeria’s inflation rate rose by 14.23% (year-on-year) in October as against 13.71% recorded in September, indicating a persistent increase in 14 months, the consumer price index report released by the National Bureau of Statistics (NBS) Monday shows.

The headline index also increased by 1.54% month-on-month compared with a 1.48% rise recorded in September. The October figures are the highest recorded since March 2018.

The year-on-year rise in composite inflation is 0.23 percentage point above the upper band of the Central Bank of Nigeria’s prediction for the end of the year. The apex bank had in September forecast headline inflation to hover around 13.97 and 14.15 percent by December. 

Inflationary pressure often rises when the economy is on the verge of a recession, with increases in the price of major food items and service fees and a persistent decrease in the purchasing power of consumers.

The Lagos Chamber of Commerce and Industry (LCCI) has urged the CBN to address the supply side variables impacting domestic prices, which are unlikely to abate till after the December festivities due to demand issues.

Also Read: Nigerian Banks Unlikely to Boost Lending Despite CBN’s Biggest Policy Rate Cut in 6 Years 

“To every inflation situation, there are demand and supply-side issues, and from what I’m seeing, due to the large demand expected during the Yuletide, it is unlikely to abate,” LCCI Director-General Dr. Muda Yusuf told the News Agency of Nigeria. “There are many variables impacting domestic prices, and any mitigation measures would have to be situated in the context of these variables.”

States with the highest inflation increase

States  Increase (Y/Y)
Zamfara  17.69%
Sokoto  17%
Ebonyi  16.91%
Bauchi  16.73%
Plateau  16.69%

The LCCI chief notes that the potency of monetary policy instruments in tackling inflation is weak, an issue that even the apex bank had admitted. In the wake of an economic crunch caused by the coronavirus pandemic, the CBN has kept its monetary policy rate low with the goal of stimulating economic growth. The MPR determines interest rates banks charge on loans and thus influences how much money is supplied into the economy.

In what is called monetary policy loosening, the move is often accompanied by a rise in inflation but Yusuf does not expect the apex bank to renege on its policy stance even in the face of inflationary pressure.

“The CBN has in recent months focused on boosting growth to improve output and moderate inflation. With the imminent recession, this is perhaps an appropriate policy choice,” he said. “For an economy seeking to quickly recover and create jobs, monetary policy tightening is not an option.”

States with the lowest inflation increase

States  Increase (Y/Y)
Cross River  11.5%
Abuja 11.84%
Lagos 11.95%
Ondo 12.33%
Kwara 12.5%

The food category led the index, rising from 16.66% year-on-year recorded in September to 17.38% in October, an indication that Nigerian households continue to spend an increasing percentage of their incomes on food. 

Also Read: CBN Slashes Monetary Policy Rate to 11.5%

On a month-on-month basis, the food sub-index increased by 1.96%, up by 0.08 percent points from 1.88% in the previous month. Major drivers were increases recorded in the prices of bread and cereals, potatoes, yam, and other tubers, meat, fish, fruits, vegetables, alcoholic and food beverages, and oils and fats.

Core inflation, which excludes the prices of volatile agricultural produce stood at 11.14% in October, up by 0.56% when compared with 10.58% recorded in September.

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.

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