Inflation Defies Hiked Interest Rate, Rises by 18.60 percent

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CEM REPORT | Nigerian Inflation has defiled hiked interest rate by the Central Bank of Nigeria to hit a 5 year high according to the report of Consumers Price Index released Friday by the Nigeria Bureau of Statistics.

The report states that inflation rate increased to 18.60 percent on a year-on-year basis in June 2022,. This Juneis 0.84 percent points higher compared to the rate recorded in June 2021, which is 17.75 percent. This means that the headline inflation rate increased in the month of June 2022 when compared to the same month in the previous year (i.e., June 2021).

Increases were recorded in all COICOP divisions that yielded the Headline index.

On a month-on-month basis, the Headline inflation rate increased to 1.82 percent in June 2022, this is 0.03 percent higher than the rate recorded in May 2022 (1.78 percent)

The Monetary Policy Committee of the CBN in May, raised interest rate to 13 per cent after 2 years of expansionary policy when rate was held at 11 percent .

The inflation report from NBS further states that the percentage change in the average composite CPI for the twelve months period ending June 2022 over the average of the CPI for the previous twelve months period is 16.54 percent, showing a 0.62 percent increase compared to 15.93 percent recorded in June 2021.

In the month of June 2022, the urban inflation rate increased to 19.09 percent (year-on-year); this is a 0.74 percent increase compared to 18.35 percent recorded in June 2021. On a month -on-month basis, the urban inflation rate rose to 1.82 percent in June 2022, this is a 0.01 percent increase compared to May 2022 (1.81 percent). The corresponding twelve-month average percentage change for the urban index is 17.09 percent in 2022. This is 0.58 percent higher compared to 16.51 percent reported in June 2021.

The rural inflation rate increased to 18.13 percent in June 2022 (year-on-year) basis; this is a 0.97 percent increase compared to 17.16 recorded in June 2021. On a month-on-month basis, the rural index rose to 1.81 percent in June 2022, up by 0.05 percent from the rate recorded in May 2022 (1.76 percent), while the corresponding twelve-month average percentage change for the rural inflation rate in June 2022 is 16.02 percent. This is 0.66 percent higher compared to 15.36 percent recorded in June 2021.

Recall that Analysts at Continental Economy Magazine had forecast that inflation will rise further despite increase in interest rate by CBN as an effort to stem the rising inflation. In the analysis, though analysts did not forecast any particular rate, all factors discussed pointed to the inability of hiked rate to curb inflation

The argument was centered on the nature of Nigerian inflation which is cost-push as against the demand pull inflation controllable by interest rate. This further rise has solidified the stands on the analysis that factors that aiding rising cost of production as well as those hindering food production must be dealt with to effectively fight inflation.

Scarcity and high cost of diesel and other fuelling products induced by the Russia Ukraine war has come to exacerbate the already precarious industrial condition caused by weakening naira that has raised cost of importation of raw material.

Insecurity in the country on the other hand is impacting tremendously on food production as farming activities are hindered suppressing local food production.

A mix of these factors have created an economic situation that would as a matter of fact continue to respond to increased interest rate with further increased inflation rate.

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