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Nigeria’s headline inflation rises to 13.71% in September
Nigeria’s headline inflation for the month of September recorded a 49-basis point rise to 13.71 per cent year-on-year, compared to the 13.22 per cent recorded in August. Food inflation increased for the 14th consecutive month to 16.66 per cent year-on-year. Financial Derivatives say Nigeria’s upward inflationary pressures are exerted by a string of factors compounded by the electricity tariff hike, currency weakness and forex scarcity. Funmi Adebowale, Research Analyst at Financial Derivatives joins CNBC Africa for more.
Thu, 15 Oct 2020 15:04:48 GMT
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AI Generated Summary
- The complex interplay of structural and monetary factors is driving Nigeria's headline inflation to a 13.71% year-on-year increase, the highest in almost three years. Supply-side constraints, such as challenges in food production states and the impact of the COVID-19 pandemic, are contributing to higher prices.
- Adequate alignment between monetary and fiscal policies is crucial to navigate Nigeria's stagflation situation, where high inflation coincides with economic contraction. Balancing the need to address inflation and stimulate growth requires a coordinated policy approach.
- The focus should shift towards efficiently utilizing resources, rather than solely on accumulating debt. Massive investments from both the public and private sectors are essential to drive economic growth and mitigate the impact of rising inflation in Nigeria.
Nigeria’s headline inflation for the month of September recorded a 49-basis point rise to 13.71 per cent year-on-year, compared to the 13.22 per cent recorded in August. The persistent rise in inflation has been a cause of concern for policymakers and economists alike, as it has been increasing for the 10th consecutive month and is at its highest level in almost three years. Funmi Adebowale, a Research Analyst at Financial Derivatives, shed light on the complex factors contributing to Nigeria's inflationary pressures in a recent interview with CNBC Africa. Adebowale emphasized that while structural factors and supply constraints are playing a significant role in driving inflation upwards, monetary variables cannot be disregarded. She pointed out that Nigeria has been grappling with a recession over the past three years and has witnessed a significant gap between inflation and growth, as well as a depreciation in the exchange rate against the dollar. The increase in minimum wage from 18,000 to 30,000 has not been able to keep up with the rising inflation, leading to a decrease in the real value of consumers' income. Furthermore, challenges in the food producing states, such as floods impacting rice production and insecurity affecting oil production, have resulted in reduced output and higher prices. The COVID-19 pandemic has exacerbated these supply-side constraints, further fueling inflation. Additionally, a boost in market liquidity due to low interest rates has added to the inflationary pressures in Nigeria. Adebowale highlighted the need for an alignment between monetary and fiscal policies to address the challenges posed by high inflation and contracting economic growth. She stressed that a coordinated approach is essential to avoid a binary choice between addressing inflation or promoting growth. Adebowale also addressed concerns about Nigeria's rising debt profile, pointing out that the focus should be on efficiently utilizing resources rather than just the accumulation of debt. With the country technically in a state of stagflation, where inflation and economic contraction coexist, Adebowale underscored the importance of judiciously allocating resources to stimulate growth and ensure a positive impact on the economy. She emphasized the need for massive investments from both the public and private sectors to navigate Nigeria's current economic challenges.
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