Nigeria - Fuel Price Hike Pushes Inflation to 12.6%

The Composite Consumer Price Index (CPI), which measures inflation, climbed sharply to 12.6 per cent in January from 10.3 per cent in December.

The 2.2 per cent rise in CPI is a setback for the Central Bank of Nigeria (CBN), which has struggled to contain inflation and stabilise the naira by tightening monetary policy in recent times.

According to the January CPI figures released yesterday by the National Bureau of Statistics (NBS), headline inflation had been caused largely by the partial removal of petrol subsidy, which pushed up prices of many food and non-food items following a hike in transportation costs.

The report showed that the Composite Food Index in January 2010 was higher by 13.1 per cent than the result in the corresponding period the previous year.

Also, the increase in food inflation was said to have been caused by increasing cost of yam, other tubers, cooking oil, meat, fruit, vegetable and beverages.

Year-on-year average annual rate of rise of the index stood at 10.5 per cent for the 12-month period ending January 2012.

The 'All Items Less Farm Produce' index, which excludes the prices of volatile agricultural products, also rose by 12.7 per cent year-on-year, while the average 12-month annual rate of rise of index remained however stable at 11.8 per cent.

According to the NBS, urban inflation rate also recorded a sharp increase when compared with the rural figure in January.

Year-on-year increase for urban and rural dwellers stood at 16.4 per cent and 9.7 per cent respectively.

The report noted that the inflationary impact of the partial subsidy removal was largely felt in urban areas relative to the rural areas where most Nigerians reside.

However, the current inflation rate, though significant, was said to have been moderated by demand factors in January.
“First, due to the proactive monetary policy from the Central Bank of Nigeria (CBN) in the second half of 2011, inflation was expected to drop to between 8 per cent and 9 per cent in January 2012 (assuming there was no partial removal of subsidy).

“This earlier tightening by the CBN therefore helped to curtail the overall impact on inflation in January 2011 following the partial subsidy removal of subsidy.

“At the same time, the slow release of funds by the government's FAAC reduced effective demand by reducing available resources for backing increased consumption and expenditure during the month,” the Bureau added