Nigeria’s Inflation Drops to 9.4%

The Central Bank of Nigeria’s (CBN’s) seems to have finally won the intense battle it staged against the country’s double-digit inflation, as latest inflation figures showed that the general prices of goods and services in the country fell to single-digit rate of 9.4 per cent in July, the lowest level in more than three years.

The latest National Bureau of Statistics (NBS), Consumer Price Index (CPI) report for July, showed that inflation slumped by 9.4 per cent year-on-year in July 2011, compared with the 10.2  per cent, year-on-year recorded the previous month in the new CPI series. CPI is the basket used to measure  changes in the price level of consumer goods and services purchased by households in the country.

The CBN had always expressed disdain for double-digits inflation rate in the country. This has seen the apex bank’s Monetary Policy Committee (MPC), adjusting various monetary policy instruments to achieve that ambition. The MPC which has operational independence in setting of interest rates in the country had increased the benchmark interest rate – the Monetary Policy Rate (MPR) four times since this year. The benchmark interest was raised from 6.5 per cent in January to 7.5 per cent in March, 8 per cent in May and to 8.75 per cent at the July meeting. Other monetary policy tools such as Cash Reserve Requirements (CRR) had also been reviewed upward.

Findings showed that the last time inflation rate in the country stood around the current level was in May 2008, when it was 9.7 per cent and since then, it has remained around at double-digits.

According to the latest report, “The monthly change of the CPI was 0.32 percent increase when compared with June 2011. The year-on-year average consumer price level as at July 2011 for ‘Urban and Rural’ dwellers rose by 6.6 and 11.7 percent respectively. The urban ‘All Items’ monthly index declined by 0.3 per cent, while the corresponding rural index rose by 0.8 percent when compared with the preceding month.

“The percentage change in the average composite CPI for the twelve-month period ending July 2011 over the average of the CPI for the previous twelve-month period was 12.0. This was slightly lower than the figure for the preceding month. The corresponding 12- month average percent change for urban and rural indices rose by 9.7 and 13.8 respectively.” It also showed that average monthly food prices rose by 0.2 percent in July 2011, when compared with June 2011 figure. The level of the ‘Composite Food Index,’ the report said, was higher than the corresponding level a year ago by 7.9 percent.

“The average annual rate of rise of the index was 12.1 percent for the twelve-month period ending July 2011. The increase in the month-on-month index was caused mainly by upward movement of the prices of some food items like yam, fruits and cereals. However, the increase in the prices of the items was less compared to the same month in the previous year causing a fall in the year –on – year percent change,” it added.

Commenting on the development, Executive Secretary, Financial Market Dealers Association of Nigeria (FMDA), Mr. Wale Abe, said the feat was expected, considering various monetary tightening measures that had been adopted by the banking sector regulator.

Abe explained: “ It is good for the country. It was expected that inflation was going to come down because of the actions of the CBN. If you take a look at the decisions at various MPC meetings held, it was intended to mop up excess liquidity in the system. The trend is likely going to continue.”