The National Bureau of Statistics (NBS), the primary source of economic and social data in Nigeria, released the Consumer Price Index (CPI) report for April 2022.
This report gives an indication of the level of inflation in the country, and according to the NBS, the inflation rate rose to 16.82% in April 2022, representing an increase from the 15.92% recorded in the preceding month. Notably, this is also the highest rate of inflation recorded in Nigeria since September 2021.
A deep dive into the report shows that the two components of the inflation basket: the food and core index, recorded significant upward movements in the month under review. Food inflation increased to 18.37% from the 17.2% figure recorded in March 2022, while the core inflation, which excludes volatile agricultural produce, rose to 14.18% from the 13.91% figure recorded in the previous month.
On a month-on-month basis, the food index increased by 2%, while the core index recorded a 1.22% month-on-month uptick. A further breakdown of the report showed that the rising core inflation was driven by increases in the price of gas, liquified fuel, cleaning, repair and hire of clothing, clothing materials, other articles of clothing, and clothing accessories. Concurrently, the rise in the food index was caused by increases in the price of bread and cereals, food products, potatoes, yams, wine, fish, meat, and oils.
Meanwhile, the rising price of goods and services has been a major bane in the Nigerian economy with the average citizens finding it hard to keep up with the upsurge in the price of things. Similarly, businesses now have to spend more on petrol to fuel their generators, while increased electricity tariffs and transportation costs have also contributed to rising operating costs. This has forced many SMEs to either reduce their profit margins or shift the extra costs to the customers, thereby causing further rises in prices.
How businesses and individuals are coping
- Individuals looking to hedge against inflation in recent times have tried to earn in foreign currencies since the naira is faced with constant depreciation against other currencies.
- Frontloading costs is also a strategy that has been adopted by individuals and businesses. This typically means buying items that are needed in the future at the earliest possible time, with the projection that the prices would rise eventually.
- Businesses are shifting the burden of rising costs to the consumers.
Why is this important?
The inflation rate is one of the major indicators used in measuring the health of any economy and Nigeria’s inflation rate is showing a galloping rise in the price of goods and services. Typically, when there is a rise in the inflation rate, savings are usually affected as expenses increase.
For some people, this is the time to cut costs by prioritising their needs while for others, it is a time to increase their earnings either by having more jobs or increasing the cost of their services.