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August Inflation Report: A tale of two food inflations
Nigeria’s inflation rate showed that the rate of consumer price increase in the month of August slowed down by 1.25% higher than the 0.79% rate in July, according to the latest NBS Consumer Price Index.
Headline Inflation fell from 33.40% in July to 32.15% in August. This is the second consecutive fall in the last 8 months.
The recent decreases in the inflation rates have been largely linked to the decrease in domestic food prices and less to do with imported food prices.
Domestic food inflation, in particular, has been a significant contributor to the nation’s overall inflation. Recent data shows that while there was a gradual decline in domestic food inflation, the prices of imported foods continued to rise.
While the headline inflation decreased by 1.25% in August, the domestic food inflation rate decreased by 2.01%, and the inflation rate on imported food increased by 1.39%.
Specifically, domestic food inflation decreased from 39.53% in July to 37.52% in August, whereas inflation on imported food rose from 36.9% to 38.3% over the same period.
In both instances of headline inflation reduction, a corresponding decline in domestic food inflation and increase in imported food inflation was observed, indicating that the decrease in domestic food prices played a critical role in driving down aggregate inflationary pressures within the economy.
Experts have attributed the increase in the prices of imported food to the depreciation of the Naira and global supply chain disruptions. The volatility of the exchange rate has further exacerbated the situation, making imported goods significantly more expensive.
The increase in imported food inflation also suggests that the suspension of tariffs on imported food, announced by President Tinubu in the middle of July and confirmed by the Comptroller-General of Customs at the end of July, have yet to take effect. Inflation reports for September and October may contain evidence, if any, of the impact of this suspension.