Lockdown, disruptions in supply chain trigger higher inflation
Disruptions in supply chain and Federal Government’s imposed lockdown in Lagos, Ogun and the Federal Capital Territory (FCT), Abuja, as well as other measures adopted by state governments, may have triggered higher inflation in the country.
This became evident as consumers paid higher for food items, while farmers suffered higher losses for produce that could not get to the nation’s markets.The National Bureau of Statistics (NBS), disclosed that Nigeria’s headline inflation continued its upward trend for the eighth month, as it expanded by 8 basis points in April 2020 to 12.34 per cent y/y from March figure of 12.26 per cent y/y.
On a month-on-month basis, the headline inflation increased by 18bps to 1.02 per cent, as inflation of food items rose to 15.03 per cent y/y in the review period, which analysts at Cordros Securities attributed to the frontloading of major food items, preceding the lockdown in FCT, Lagos and Ogun states.
The NBS revealed that the rise was caused by increases in prices of potatoes, yam and other tubers, bread and cereals, fish, oils and fats, meat, fruits and vegetables, adding that compared to March 2020, food inflation expanded by 24bps to 1.18 per cent m/m.
The Guardian had reported farmers’ concerns, especially as it relates to huge debts, glut and crops wastage due to the lockdown that prevented off-takers from buying their commodities.
The NBS had said the lockdown and other disruptions in normal economic activities in several states that started in April 2020 could not have had any major impact on the March 2020 inflation.
However, with the removal of subsidy, disruptions in global supply chains as a result of COVID-19 pandemic, fall in oil prices, leading to drastic drop in government revenues, observers expect further rise in inflation in the months ahead.
Chief Executive Officer of Financial Derivatives, Bismarck Rewane said inflation is expected to spike further into the year, while core inflation was up by 25bps to 9.98 per cent.
Most of the pressures in the month were recorded in the prices of bicycles, road transport by road and inland waterways, paramedical services, hospital services, pharmaceutical products, medical services, motorcycles and major household appliances. On a month-on-month basis, the core index was up by 13bps 0.93 per cent.
To check inflation and other disruptions to the economy, the Lagos Chamber of Commerce and Industry (LCCI), urged firms to adopt a flexible business model to ensure tight control on costs and non-revenue generating segments of the business, and also review supply chain by focusing on import substitution and backward integration as much as possible.
National President of the Federation of Agricultural Commodity Association (FACAN), Dr. Victor Iyama, told The Guardian that agro exporters were badly affected, warning that lack of foreign exchange could worsen the situation.
In April 2020, inflation of all items was highest in Bauchi (14.44%), Sokoto (13.99%) and Plateau (13.68%), while Edo (10.87%), Abuja (10.81%) and Kwara (8.98%) recorded the slowest rise in inflation.
On month-on-month basis, all items inflation was highest in Akwa Ibom (2.01%), Oyo (1.91%) and Abia (1.81%), while Edo, Enugu and Bayelsa recorded negative inflation.
Inflation of food items on a year-on-year basis was highest in Sokoto (17.88%), Akwa Ibom (17.55%) and Abuja (17.65%), while Ebonyi (13.04%), Edo (12.90%) and Enugu (12.89%) recorded the lowest rise.
On month-on-month basis, April 2020 food inflation was highest in Akwa Ibom (2.65%), Lagos (2.49%) and Oyo (2.33%), while Bayelsa, Ebonyi and Enugu recorded negative inflation.