Holidays usually comes with a lot of festivities, parties and family gatherings which would ultimately involve spending particularly on food items. I am almost certain that most of us if not all felt the brunt at the supermarkets or any other markets whilst shopping for the Easter holiday.
In my case, I was left scrutinizing my bill wondering what I had purchased and if there was an error somewhere. Sadly, there wasn’t any error, prices have just risen sharply. The NBS released inflation figures for the month of March on Friday last week and inflation grew by 15.92% , higher than 15.70% recorded in February 2022. The question that comes to mind is, does this figure truly represent the reality of what we are experiencing?
My Inflation Basket what is yours?
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Inflation: A cry for help
We are not alone in our dissatisfaction; annual consumer price inflation (CPI) in the UK is 7%, 8.5% in the US, and 7.5% in the Eurozone. It is 7% in India, 16.7% in Russia, 52.3 % in Argentina, and 61.1 % in Turkey. All are at historic highs. How did we get here?
The pandemic caused global production shutdowns, and the post-lockdown surge in demand has caused major bottlenecks in supply chains as businesses struggle to catch up. This has resulted in shortages of everything from microchips to shoes, furniture, and, most concerningly, food. The effects of climate breakdown have exacerbated the food crisis, with droughts, floods, and wildfires disrupting production.
All of this has been accelerated by the conflict in Ukraine, with Russia and Ukraine accounting for roughly a quarter of global grain trade. Food prices are now at all-time highs – even higher than during the 2008 global food crisis, which pushed 155 million people into extreme poverty.
FAO Food Price Index
US INFLATION: Gas prices at an all-time high?
The annual inflation rate in the United States increased to 8.5% in March 2022, the highest since December 1981, up from 7.9% in February and exceeding market expectations of 8.4%. Energy prices increased by 32%, with gasoline (48%) and fuel oil (70.1%) rising as a result of Russia’s invasion of Ukraine, which drove up crude oil prices. In addition, food prices increased 8.8 %, the most since May 1981.
US INFLATION 5-YEAR CHART
To combat inflation, the Fed has begun raising interest rates, and it is expected to do so for the rest of the year and into 2023. When prices were this high in the past, the Fed raised its benchmark rate to nearly 20%, plunging the economy into a recession that eventually defeated inflation. However, given the fragility of economic growth and global uncertainties, we do not expect a repeat of this.
Nigeria Inflation: Joining the Party
Nigeria’s annual inflation rate increased to 15.92 % in March 2022, up from 15.70% the previous month, marking the fastest increase in consumer prices since October of last year. The rise in annual headline inflation reflects the far-reaching consequences of the Eastern European crisis, as well as the lingering effects of legacy drivers. While the core index moderated slightly in the review month, food prices increased, boosting the headline index’s increase.
The food subindex increased by 1.99 % MoM, representing a 0.12% increase from the rate of 1.87% in February 2022. The yearly average rate increased to 19.21 %, 0.48 % lower than the previous month’s rate of 19.69 %. The global disruption of food supply, as well as existing legacy problems with production, insecurity, and transportation, all had an impact on food prices.
Core inflation was 0.98% MoM, a 0.35% decrease from the 1.33% recorded in February 2022. The yearly average rate also increased to 13.56% last month, 0.10 % higher than the previous month’s figure of 13.46 %. Prices for gas, garments, shoes and other footwear, clothing materials, other articles of clothing and clothing accessories, liquid fuel, fuels and lubricants for personal transport equipment, and other services related to personal transport equipment increased the most.
Looking ahead, we maintain a pessimistic outlook for inflation in the coming months, as global inflationary pressures collide with a deteriorating domestic economic environment. Global supply disruptions in the energy and agriculture sectors should weigh on local prices as geopolitical tensions persist. Back home, staple food prices should experience some scarcity as we enter the planting season, while legacy food production and distribution issues remain dominant. Furthermore, the benefit of the high base effect is expected to fade in the coming months, allowing for a more pronounced rise in the relevant inflation indexes.