Subdued spending, unemploymemt caused by the continued inflation – FBNQuest
As inflation goes on the uptick in Nigeria after a fall, analysts have said the rising inflation trend will lead to subdued spending, , rising unemployment and falling living standards, analysts at FBNQuest in a note titled’Inflationary pressure, impacting wallets, pointed out that food onflation had been the primary driver for acceleration of headline inflation with a year on year groewth of 14.48 percent.
“The border closure which took effect since August has fueled selective price increases, particularly in the food segment:, they said.
“The transport segment, which accounts for 6.5% of the total inflation basket, shows an inflationary price increase of 0.8% m/m in November (unchanged from the previous month) and 9.2% y/y compared with 9.1% recorded in October. Transportation costs feed into spending patterns for most Nigerians
“The segment categorised as ‘housing, water, electricity, and gas and other fuels’, the largest component of the core measure, recorded an inflationary price increase of 7.7% y/y in November compared with 7.6% y/y in October. This segment gulps a sizeable portion of monthly expenses across households” they further explained.
For education, inflationary price increase was 8.7% y/y in November., showing school fees increases across education levels, particularly in private schools.
At its latest meeting, the monetary policy committee noted the recent upticks in inflation were partly due to seasonal end-year festivities but further accentuated by the border closure. The food supply shock should adjust over the medium term, provided there are increased investments in food production.
While noting recent improvement in the econmic growth rate, they said the growth rate has been below underlying population expansion, causing the the impact on employment levels or living standards not to be significant.
“Household wallets have not necessarily been re-built. Inflationary pressure has also contributed to subdued spending. Headline inflation has remained at double-digits since February 2016. The headline rate recorded consecutive decreases between May and August, before posting steady upticks”.
As for education, inflationary price increase was 8.7% y/y in November. This is mirrored in school fees increases across education levels, particularly in private schools.
At its latest meeting, the monetary policy committee noted the recent upticks in inflation were partly due to seasonal end-year festivities but further accentuated by the border closure. The food supply shock should adjust over the medium term, provided there are increased investments in food production.