Statistics recently released by the National Bureau

of Statistics, NBS, indicates that annual inflation

rate in Nigeria rose to 9.4 percent in September,

following a 9.3 percent growth in the previous

month. It was the highest value since February of

2013, driven by increased food price in the country.

Compared to September 2014, food cost increased 10.2

percent, up from 10.1 percent in August, and imported food

prices grew 10.8 percent. Additional upward pressures came

from: housing, water, electricity and gas (+7.8 percent);

clothing and footwear (+9.5 percent); transport prices

(+9.1 percent); furnishings and household equipment (+8.7

percent); education (+9.7 percent); health (+8.7 percent);

miscellaneous goods and services (+9.2 percent); hotels,

cafés and restaurants (+9.2 percent); alcoholic beverages,

tobacco and kola (+9.1 percent).

On a monthly basis, consumer prices held constant growth

for the second consecutive month at 0.6 percent, the lowest

pace recorded this year. Food cost went up 0.64 percent.

Inflation which is defined as a sustained increase in the

general level of prices for goods and services, is measured

as an annual percentage increase. As inflation rises, every

Naira we own buys a smaller percentage of a good or

service. In essence, inflation means that the prices of goods

and services increase over a certain period and a fixed Naira

amount will only buy lesser amounts of goods and services

as the inflationary trend progresses. Hence, an increase in

the inflation forecast for Nigerian consumers suggests that

workers salary for instance, won’t be enough to buy the

same volume of goods it used to buy.

In the last one year, inflationary trend has maintained

a single-digit fluctuation for the second year since 2013

to suggest that the inflationary trend is operating with

low-volatility, but the gradually inching up in the last two

months gives cause for concern for a country endowed with

huge potentials.

The inflation rate fell to its lowest level in March 2014

when it came in at 7.7% and the inflation rate was highest in

August 2014 when it came in at 8.5%. With the latest figure

released by the NBS, it means we have had three straight

months of a drop in the inflation rate followed by three

straight months of increase in the inflation rate.

The first point driving inflation up is an increase in the

prices of food coming from the Northeastern part of the

country. The supply of food from the northeastern part of

Nigeria has been reduced drastically as unrest continues

to prevail in the region. Going forward, we can expect

continued shortage in food supply and a concomitant

increase in food prices until the insurgency is reasonably


Secondly, the decision of the Central Bank of Nigeria to

tighten its monetary policy, federal government –induced

austerity measures and the devaluation of the Naira are

all contributing factors. For one, importation of foreignmanufactured

goods come with a higher markup cost as

importers find it increasingly hard to obtain forex and as

they have to pay more Naira to buy Dollars because of the


It is therefore regrettable that after an appreciable economic

performance in the last two years, Nigerian economy is

witnessing some anxious moment. Severe pressures built up

in the economy is exacerbated by the transfer of government

sector deposits in commercial banks to a Single Treasury

Account domiciled with the Central Bank of Nigeria, CBN

and the resultant decrease in liquidity level of commercial

banks with adverse consequences on the economy.

The inflationary pressure is further aggravated by high

demand for imports of both intermediate inputs and

consumer goods due to over valuation of the Naira which has

made imports relatively cheaper than locally manufactured

goods. In this case, the impediments to development may

be referred to as cost. Economics postulate that for profit to

be maximized, cost should be minimized. One of the main

costs is inflation, which has turned into a canker worm

eating deep into the nation’s path of economic progress.

To mitigate the situation, fiscal discipline must be restored

and the pressures on the exchange rate and domestic

prices moderated significantly. The CBN may also consider

gradually relaxing its tight monetary policies.

Undoubtedly, one of the macroeconomic goals which the

government must also strive to achieve is the maintenance

of stable domestic price level. This goal should be pursued

in order to avoid cost of inflation or deflation and the

uncertainty that follows where there is price instability.

Lastly, the effects of current rising inflation on economic

growth should be examined bearing in mind that a country

will grow faster in real terms if inflation is reduced to the

barest minimum. Indeed, the attainment of every other

macroeconomic goals depends on the maintenance of a

stable and low inflation environment.

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