Abuja – An economist, Prof. Sarah Anyanwu, has predicted that the high inflation rate in the country could crash between August and September, as agricultural produce are harvested from the farms.
Anyanwu, Head of Economics Department, University of Abuja, made the prediction on Monday in an interview with the News Agency of Nigeria (NAN) in Abuja.
She said that the Consumer Price Index (CPI) as recorded by the National Bureau of Statistics (NBS), moved from 12.8 per cent in March to 13.7 per cent in April and 15.6 per cent in May.
NAN reports that the CPI, which measures inflation, recorded a relatively strong increase for the fourth consecutive months.
Report says it was the highest reading in more than six years as cost of food, housing, utilities and transport surged mostly due to 67 per cent increase in the price of petrol.
Anyanwu said: “The latest CPI is showing an increase of 0.9 and 1.9 per cent points within the period.
“This double digit increases, have impeded the real growth rate of the economy among others.
“CPI measures the average change over time in prices of goods and services consumed by people for day-to-day living.
“Hypothetically, I think the CPI will fall over the next few months and it is expected of prices of agricultural goods and products to fall in the CPI basket with the new harvests.
“The kind of inflation we witness vary from the traditional definition of inflation where much money in circulation chases fewer goods, although, there are many types of inflation. “
The don said that the scenario was such that there had been food scarcity owing to increased incidence of flooding and drought in the country in 2015.
She explained that climate change contributed to food scarcity as President Muhammedu Buhari had warned that the country might face the threat of food security this year.
“He raised the alarm while stating Nigeria’s position at the Conference of Parties 21(COP 21) in Paris France, November 30th, 2015.
“Again, pests have ravaged tomatoes and other food crops in the farms, leaving little or nothing for consumption, “ Anyanwu said.
In addition, she said that unfavourable exchange rate in the Forex market had made importation unnecessarily expensive at high cost to the importers and the consumers too.
“Therefore, goods imported into the country for local consumption have been sold at very high prices. Let’s not forget that we import almost everything, either in raw forms or finished products.
“There has been ban on importation of some items by the government, which has made prices of available ones very high, an example is rice.
“Government expenditures have been minimised last year and entirely delayed since the beginning of this year.
“2016 budget was being dragged from pole to pole thus, limiting disbursement of funds which could have stimulated domestic output to match demand and reduce rising prices.
“The resultant impact is that domestic output is small, importation is expensive, investment is unstable and cash flow is constrained, increasing general prices of goods and services at a sustained rate, “ she said.
The don further explained that government expenditures would likely increase from next month if statutory allocations were released to Ministries Departments Agencies (MDAs).
She said that the outright delay and stiff government`s expenditures ultimately negatively affect cash flow, local production and consumption of goods and services owing to the fact that Nigeria has a large government driven space in the economy.
“The country is still developing; private participation is hampered by policy constraints.
“Majority of the influx of cash in the private sector through consumption pattern, be it in industry, manufacturing, agriculture and even financial, depends on a large chunk of funds coming from government expenditures.
“This is because the government plays a vital role in production of goods and services. To examine recent events in the construction, manufacturing, real estate and banking sectors to say the least.
“ The retrenchments and cut of pay-checks are evidences that the current dealings are unpleasant economically.
“The expected and productive increase in government expenditures would increase domestic consumption, local production and possibly reduce prices of commodities in the markets,“ she added.
According to her, forex is quite a challenge and very pertinent in this issue because foreign prices influence domestic goods and services.
She said that foreign prices influenced domestic goods and services through imports that are engineered by the current exchange rates.
“Nevertheless, my expectation is for CPI to fall, perhaps for a start marginally, “ the don said. (NAN)