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Rising Food Prices Push Inflation Further to 8.5%

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IMAGE: Ngozi Okonjo Iweala, Finance Minister »


The Consumer Price Index (CPI), which measures inflation, rose to 8.5 per cent in August compared to 8.3 per cent in the previous month, according to the National Bureau of Statistics (NBS).

This would be the sixth time in a row the headline index has increased relative to the previous month, further dampening hopes that the current tight monetary policy regime may be eased by the Central Bank of Nigeria (CBN).

The NBS, in its latest CPI figures released yesterday, attributed the rise in inflation to higher prices in a broad array of food groups which contributed to the index.

It said prices were however slowed by a muted increase in the bread and cereal group.

According to the statistical agency, the food index rose higher to 10.0 per cent in August compared to 9.9 per cent recorded in July.

Urban prices increased by 0.2 percentage points to 8.7 per cent (year-on-year) in August – the fourth consecutive month – while its rural component has exhibited the same trend over the period increasing by 0.3 percentage points from 8.1 per cent in July to 8.4 in August.

However, on a month-on-month basis, the pace of increase in urban prices slowed for two straight months as Urban Headline Index increased by 0.51 per cent in August, roughly 0.2 percentage points lower from July. The Rural All-items Index rose at a slower pace by 0.47 per cent in August, down from 0.60 per cent in July.

It said: “The pace of increase in all the items less farm produce or core index, which excludes the prices of volatile agricultural products slowed for the second consecutive month in August.

“Prices rose by 6.3 per cent (year-on-year), down from 7.1 per cent in August, and surpassing January’s low of 6.6 per cent.

“On a month-on-month basis, prices increased at a faster rate in August. Prices rose by 0.4 per cent, up by 0.2 percentage points from July.”

Continuing, it added that on a month-on-month basis, the highest price increases were recorded in the coffee, tea and cocoa; fruits, meats, fish, oils and fats groups.

“The average annual rate of change of the food sub-index for the twelve-month period ending in August 2014 over the previous 12-month average was 9.5 per cent. The 12-month rate of change has held steady for the previous three months.

“The fastest increases were recorded in the solid fuels, wine; audio-visual, photographic and information processing equipment; and fuels and lubricants for personal transport groups. The average 12-month annual rate of rise of the index was recorded at 7.3 per cent for the 12-month period ending in August 2014,” NBS said.

Also, the statistical bureau said Nigeria's capital importation portfolio increased by 48.6 per cent to about $5.80 billion in the second quarter of the year, compared to about $3.90 billion recorded in the opening quarter, representing an increase of about $1.89 billion.

But relative to about $5.61 billion recorded in the corresponding quarter of 2013, capital importation increased by $186.23 million or 3.32 per cent, year-on-year, the NBS stated.

In total, the sum of about $9.70 billion had been imported into the economy within the first and second quarters of this year, which is about $2.50 billion or 20.54 per cent lower than about $12.21 billion recorded for the same period in 2013.

According to the second quarter capital importation data released yesterday by the NBS, equity constituted the major growth driver of capital imported in the quarter, contributing 85.03 per cent of the positive change in capital importation from the opening quarter of 2014.

Portfolio equity accounted for about $3.87 billion or 66.77 per cent of total Q2 2014 capital importation up by about $1.61 billion or 71.45 per cent compared to about $2.26 billion recorded in Q1 2014.

According to NBS, there was a slightly negative annual growth in portfolio equity inflows of $58.86 million or 1.50 per cent compared to the corresponding quarter of 2013, in which portfolio equity represented about $3.93 billion or 70.03 per cent of total capital imported.

The portfolio investment in bonds accounted for the second largest driver of growth in capital importation, representing about $731.74 million or 12.61 per cent of total capital imported. The sector grew by $581.01 million or 385.44 per cent year-on-year, and increased by $249.25 million or 51.66 per cent compared to the preceding quarter.

According to the report, shares continue to attract the most foreign capital into the country, accounting for about $3.39 or 58.52 per cent of total capital imported Q2 2014. Nevertheless, the value represented a $501.27 million or 12.86 per cent decline in year-on-year growth, from about $3.89 billion inflow recorded in the corresponding quarter of 2013.

But relative to about $2.77 billion recorded in the opening quarter of 2014, shares increased by $622.87 million or 22.46 per cent.

On year-on-year growth in total capital imported, the financial sector represented $723.14 million or 12.46 per cent of the total for the second quarter, with growth of $116.19 million or 19.14 per cent recorded from the corresponding quarter of 2013.

Capital imported for financing increased by $377.87 million or 109.44 per cent quarter-on-quarter, making it the third largest source of capital imported.
Meanwhile, capital importation classified by state of destination showed Lagos surpassed other states in its capital receipts, which stood at about $5.70 billion or 98.34 per cent of total commercial capital in Q2 2014.

NBS said: “Lagos experienced year-on-year growth in capital importation of $149.03 million or 2.68 per cent, whilst inflows increased by $1,949.74 million or 51.87 per cent from the preceding quarter.

“From the first quarter of 2013 through the second quarter of 2014, the 96.25 per cent share recorded in the opening quarter of 2014 represented a local minimum, from the peak of 98.95 per cent recorded in the corresponding quarter of 2013.”

It said capital imported to FCT Abuja declined substantially by $84.34 million, or 95.50 per cent in the period under review, while Enugu State was said to have experienced a $4.30 million or 8.53 per cent rise in the value of capital imported, receiving $54.68 million, although its share of total capital imported declined by 0.35 percentage points to 0.94 per cent.

“Enugu experienced by far the greatest year-on-year growth in capital importation of over 230,000 per cent, increasing by $54.66 million to reach its place as the second largest capital importer in the second quarter,” the report stated.

Furthermore, an assessment of capital importation by country of origin showed the United Kingdom continued to provide the greatest source of capital imported into Nigeria, with about  $3.97 billion or 68.46 per cent of total receipts in Q2 2014.

“This is followed by the United States, which provided $1.003 billion or 17.28 per cent of Nigeria’s capital imported. Other significant contributions came from Belgium with $373.69 million or 6.44 per cent, France with $89.75 million or 1.55 per cent, Mauritius with $79.34 million or1.37 per cent and Switzerland with $60.57 million or 1.04 per cent; all other countries constituted values amounting to less than one per cent of the total,” the report said.

Continuing, it added that the UK is also growing in dominance in the capital importation sector of Nigeria. Its second quarter this year share is the largest of the total, with previous shares of 54.63 per cent in the first quarter of 2014 and 53.86 per cent in the corresponding quarter of 2013.
“Indeed, inflows from the UK are increasing, with year-on-year capital importation growth of $947.73 million or 31.32 per cent, and a $1.84 billion or 86.26 per cent rise from the opening quarter of 2014.

“The story for the second greatest contributor, the US, however, was a little more mixed. Despite a negative year-on-year growth of 6.65 per cent, translating to $71.49 million less imported, there was an increase in inflows thus far in 2014, rising by $471.19 million or 88.62 per cent from the preceding quarter,” the NBS report stated.

Article Credit: Thisdaylive

Updated 2 Years ago

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