Lockdown stokes pressure on food prices, as inflation hits 12.6% in March

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The National Bureau of Statistics (NBS), yesterday, announced that Nigeria’s  inflation rate increased to  12.6 per cent in March, 2020 from 12.26 per cent recorded in February, the highest in 23 months.

This, NBS said, is 0.06 per cent points higher than the rate recorded in February 2020(12.20) per cent.

The Bureau noted  that the  lockdown in Abuja, Lagos and Ogun states and various major disruptions in normal economic activities in several states started in April 2020 and accordingly would not have had any major impact on March 2020 inflation.

According to the Bureau, the corresponding twelve-month year-on-year average percentage change for the urban index was 12.15 per cent in March 2020 (this is higher than 12.03 per cent reported in February 2020), while the corresponding rural inflation rate in March 2020 was 11.14 per cent compared to 11.09 per cent recorded in February 2020.

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“The percentage change in the average composite Consumer Price Index (CPI) for the twelve months period ending March 2020, over the average CPI for the previous twelve months period was 11.62 per cent, showing 0.08 per cent point from 11.54 per cent recorded in February 2020.

“Increases were recorded in all Classification of Individual Consumption According to Purpose  (COICOP) divisions that yielded the headline index.

Meanwhile, Food inflation is expected to increase by the end of April 2020 due to the impact of the lockdown announced by President Muhammadu Buhari in an attempt to flatten the curve of rising COVID-19 cases in Nigeria.

This was the view of  some investment analysts after the National Bureau of Statistics (NBS) released inflation data for March 2020 yesterday.

The Consumer Price Index (CPI) report showed a sustained uptrend in headline inflation to 12.3 per cent year-on-year (Y-o-Y) from 12.2 per cent in February 2020. This was the seventh consecutive month of increase since August 2019 and the highest level since April 2018.

According to analysts who spoke with Leakblast, the marginal rise in inflation suggests a muted transmission of the recent Value Added Tax (VAT) increase as well as exchange rate pressures.

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Specifically, Cordros Capital, said, “From our channel checks, we understand that the impact of the lockdown is stoking upward pressure on food prices in April, owing to the disruption of the supply chain in the agriculture sector and the front loading of food items purchases by consumers.

Furthermore, the investment firm said the Naira, which had held steady in the parallel market for more than two years, depreciated by 12.8 per cent against the greenback to N415/USD in March 2020 alone.

“Already in March, we saw evidence of price pressure in Ogun (Food inflation: +130 basis points y/y) and Abuja (Food inflation: +80 basis points y/y), occasioned by the lockdown-induced price increases. Thus, food inflation is expected to grow faster in April by 16 basis points to 1.10 per cent month-on-month (m/m)”, It said.

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This was as analysts at Afrinvest, noted that there might be increased pressure on domestic consumer prices, mainly food while adding that their expectation is driven by the disruption to the agriculture value chain amid the lock-down as well as the lean season when there is usually reduced agriculture output.

“We believe there would be a faster-paced increase in inflation once the lockdown measures are relaxed and economic activity resumes. Until then, the pass-through of trade restrictions, exchange rate weakening and the recent VAT increase to consumer prices would be muted”, they said.

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