Food prices, others ease pressure on August inflation rate

•But new fuel price may reverse the ease

By Peter Egwuatu & Elizabeth Adegbesan

Financial analysts have attributed the drop in the August inflation rate to a slower food inflation rate and base effect.

According to the National Bureau of Statistics, NBS, Consumer Price Index, CPI, Report for August 2024, food inflation fell to 37.52 percent in August from 39.53 percent in July due to a decline in prices of tobacco, tea, coco, coffee, groundnut oil, milk, yam, irish potatoes, water yam, cassava tuber, palm oil and vegetable.

The NBS, yesterday, reported that headline inflation rate eased by 1.25 percentage points to 32.15 percent in August 2024 from 33.4 percent in July representing the second consecutive month-on-month decline this year.

NBS said: “In August 2024, the headline inflation rate further eased to 32.15 percent relative to the July 2024 headline inflation rate of 33.4 percent.

“Looking at the movement, the August 2024 headline inflation rate showed a decrease of 1.25 percentage points when compared to the July 2024 headline inflation rate.

“However, on a year-on-year basis, the headline inflation rate was 6.35 percentage points higher compared to the rate recorded in August 2023 (25.8 percent).

“This shows that the headline inflation rate (year-on-year basis) increased in August 2024 when compared to the same month in the preceding year (i.e., August 2023).

“Furthermore, on a month-on-month basis, the headline inflation rate in August 2024 was 2.22 percent, which was 0.06 percentage point lower than the rate recorded in August 2024 (2.28 percent). This means that in August 2024, the rate of increase in the average price level is lower than the rate of increase in the average price level in July 2024.”

On food inflation the bureau said: “ The Food inflation rate in August 2024 was 37.52 percent on a year-on-year basis, which was 8.18 percent age points higher compared to the rate recorded in August 2023 (29.34 percent).

“The rise in Food inflation on a year-on-year basis was caused by increases in prices of the following items, Bread, Maize Grains, Guinea Corn, etc (Bread and Cereals Class), Yam, Irish Potatoes, Water Yam, Cassava Tuber, etc (Potatoes, Yam & Other Tubers Class), Palm Oil, Vegetable, etc (Oil & Fats Class) and Ovaltine, Milo, Lipton, etc (Coffee, Tea & Cocoa Class).

“On a month-on-month basis, the Food inflation rate in August 2024 was 2.37 percent which shows a 0.10 percentage point decrease compared to the rate recorded in July 2024 (2.47 percent).

“The fall can be attributed to the decline in the rate of increase in the average prices of Tobacco, Tea, Coco, Coffee, Groundnut Oil, Milk, Yam, Irish Potatoes, Water Yam, Cassava Tuber, Palm Oil, Vegetable etc.”
However, analysts have predicted a renewed inflationary pressure in the coming months due to the current increase in pump price of fuel which, according to them, resulted in an increase in core inflation in August.

Analysts at CardinalStone Research said: “We attribute the deceleration to the food basket, which moderated by 201 basis points (bps) to 37.52 percent Year-on-Year (YoY), largely supported by the onset of the harvest season.

In their September Prism Outlook , analysts at Financial Derivatives Company, FDC, said: “Headline inflation in August was projected to decline, largely attributed to base effects.

“However, the recent hike in petrol prices could renew inflationary pressures in subsequent months, which would exacerbate the cost of living crisis and potentially lead to social unrest.”

CBN should halt MPR hike – Prof Uwaleke

Reacting to the easing of inflation, Prof Uche Uwaleke, President, Association of Capital Market Academics of Nigeria, ACMAN, said: “Note that the easing in the headline inflation rate is due chiefly to the moderation in food inflation occasioned by the harvest season. The drought reported in many parts of the North partly explains the high rate of food inflation in States like Sokoto and Kebbi. Also note that core inflation rate increased in the month of August.

“What all these point to is that it is time for the CBN to recognize the real pressure points and shift some attention to how the fiscal authorities can be supported to boost food production beginning with a halt in Monetary Policy Rate, MPR hike this month”.

Cost of living remains elevated- Egbomeade

In his reaction, Clifford Egbomeade, Public Affairs Analyst Communications expert said: “The slight decline in Nigeria’s inflation rate from 33.4% in July to 32.15% in August 2024 reflects some degree of success in efforts to stabilize price levels. However, the inflation rate remains considerably high, especially when compared to the 25.80% recorded in August 2023. This highlights persistent inflationary pressures, driven largely by structural issues such as food insecurity, exchange rate volatility, and supply chain disruptions.

“While the two consecutive months of easing inflation offer some optimism, it is essential to recognize that the underlying factors driving inflation, particularly food inflation, are still very much in play. The food inflation rate of 37.52% year-on-year is concerning, given that food makes up a significant portion of household spending in Nigeria. This trend suggests that the cost of living remains elevated, disproportionately affecting lower-income households who spend more of their income on food”.

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