The rising cost of production, elevated transport prices, sustained insecurity and weaker Naira pushed Food and Headline Inflation to 355.41 per cent and 29.90 per cent respectively.
As the rising costs of goods and services in the country persists, the National Bureau of Statistics (NBS) has released the January 2024 headline inflation rate which increased to 29.90 per cent relative to the December 2023 headline inflation rate which was 28.92 per cent.
Food inflation similarly rose to 35.41 per cent compared to 33.93 per cent which it was in December last year.
Typically inflation in the country slows in January after the spike in year-end festivities, however, the data released by the NBS showed that the January 2024 headline inflation rate showed an increase of 0.98 percentage points when compared to the December 2023 headline inflation rate.
Commenting on the rising inflation, analysts at CardinalStone Research, in an emailed note, said: "Consumer prices remain stubbornly elevated, scaling by 98 bps to 29.9 per cent YoY in January 2024, outpacing Bloomberg consensus estimate of 29.5 per cent. Most of the pressures remain skewed to food, fuelled by the rising cost of production, elevated transport prices, and sustained insecurity concerns.
"To rein in rising food prices, the federal government says it will soon establish a National Commodity Board, tasked with the responsibility of regulating food prices and managing strategic food reserves.
"Despite the action, we think that food prices may remain pressured in the short term, with the Niger State government banning the mass purchase of foods in the state for onward distribution to other states in the country.
"Elsewhere, core inflation remains biassed to the upside, ticking up by 53bps in the review period. We attribute the uptick to the sustained currency pressures, given that the naira at the official market has depreciated by circa 39.7 per cent year to date. Given that the CBN has guided that the current inflation trajectory requires further tightening, we see legroom for about 150 bps - 200 bps increase in policy rate at the February MPC meeting."
Analysts at Financial Derivatives noted that, with rising inflation, the MPC is expected to maintain its hawkish stance in a bid to rein in inflationary pressure.
"The likelihood of MPC raising the policy rate by at least 200 basis points (bps) to 20.75 per cent p.a. from the current rate of 18.75 per cent p.a. In the past, an increase in the policy rate has not affected the general rate but this time it may likely do," it said.
To the director/CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, the persistent inflationary pressures in the Nigerian economy continue to be a troubling phenomenon, especially because of the acceleration effect on poverty and deterioration of citizens welfare, with purchasing power continuing to slump over the past few months.
He added that, regrettably, the major inflation drivers are not receding; if anything, they have become even more intense.
He said: "These include the depreciating exchange rate, surging transportation costs, logistics challenges, forex market illiquidity, astronomical hike in diesel cost, insecurity in farming communities and structural bottlenecks to production.
"These are largely supply side issues. The weakening of the naira against the currency of our neighbouring countries (CFA) had continued to incentivise the outflow of agricultural products to these countries. This is complicating the supply side challenges, especially of food crops."
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He said tackling inflation requires urgent government intervention to address the challenges bedevilling production, productivity, foreign exchange and insecurity in the economy, adding that the real sector of the economy needs to be incentivised to ensure moderation of production costs.
"The government needs to review its tariff policies by granting concessionary import duty on intermediate products for agro allied industries and other industrialists. The same is true of investors in the logistics sector. The exchange rate benchmark for the computation of import duty should be pegged at N1,000 per dollar.
"This is necessary to reduce the pressure of escalating costs of cargo clearing and minimise uncertainty in the international trade processes. The policy choice of complete floating of the naira requires a rethink in the light of the current inflationary outcomes, volatility and market imperfections," he added.
