Complete Border Closure: Hinderance To A Single- Digit Inflation Dream?

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rice July Headline Inflation Rate Jumpsto 12.82% as Food Prices Rise…
A vendor arranges bags of rice at the Wuse market in Abuja, Nigeria May 15, 2018. REUTERS/Afolabi Sotunde

Earlier, the National Bureau of Statistics (NBS) published Nigeria’s inflation report for Sept-19. According to to the report, consumer prices halted its recent dis-inflationary trend as the headline inflation rate rose to 1 1.2 4% y/y – 2 2bps higher than 1 1.0 2% recorded in Aug-1 9.

The increase in the headline inflation was buoyed by pressures from both core and food inflation sub-indexes. The rate of increase in food inflation sub-index accelerated, up 3 4bps to 1 3.5 1% y/y and the core inflation sub-index increased by 2 6bpst o 8.9 4% y/y.
Further analysis revealed that the partial closure of the Seme border by the Federal Government (FG) had left a negative imprint on the inflation figure. To compound an already slippery situation, the F G recently ordered the complete closure of the Nigerian land borders, placing a ban on both legitimate and illegitimate movement of goods in
and out of the country, leaving air and seaports as the only available option for international trade in goods.

Complete Border Closure: Hinderance To A Single- Digit Inflation Dream? - Brand Spur

The decision regarding the full closure of the border might be positive from the angle of preventing smuggling, dumping of sub-standard and harmful goods into the country as well as protecting local producers. However, this might put more pressure on the general price level, especially on food prices in the immediate term. Also, trade relations with
neighbouring countries are threatened, a narrative that complicates the recently signed the African Continental Free Trade Agreement.

                 UNITED CAPITAL RESEARCH