Decline in headline inflation doesn't reflect economic realities-Uwaleke

President, Association of Capital Markets Academics (ACMAN), Prof. Uche Uwaleke, says the latest inflation figures released by the National Bureau of Statistics (NBS) do not reflect the current economic realities.

NBS in its Consumer Price Index (CPI) report for June on Friday stated that the CPI, which measures the rate of change in prices of goods and services dropped to 17.75 per cent in June from 17.93 in May.

Speaking on this development, Prof. Uche Uwaleke told our correspondent that “the inflation report for June by the NBS, it is difficult to interpret this marginal drop in headline inflation since April this year to mean a sustainable downward trend in inflation rate.

“This is because the risks to inflation outlook are still present. These include insecurity which directly impacts food inflation, the recent devaluation of the naira and the likely hike in pump price of fuel and electricity tariffs.

“It is also possible the marginal drop in food inflation to 21.83 per cent in June may not reflect actual drop in basic food prices but arising from the ‘base effect’ associated with the methodology of computing CPI on a year on year basis.

“To appreciate the practical reality, one needs to consider price changes based on month-on-month. According to NBS, Headline inflation increased by 1.06 per cent in June from 1.01 per cent recorded in May month-on-month.

“It is pertinent to note that Inflationary pressure is coming more from the food component at over 20 per cent reflecting legacy factors such as inadequate supply and transport challenges.

“This partly explains why food inflation is highest in Kogi and lowest in neighbouring FCT,” he explained.

He advised that the federal government and the CBN should scale up interventions in Agriculture with adequate monitoring and evaluation mechanisms put in place.

He further submits that, “The CBN should equally continue to ensure forex market liquidity to reduce exchange rate especially now that crude oil prices are relatively high.

“In order to increase food output, the need to tackle the seemingly intractable security challenge facing the country cannot be overemphasized.”

Meanwhile, the latest inflation rate of 17.75 per cent in implies that prices continued to rise in June 2021, but at a slightly slower pace than it did in May 2021.

On month-on-month basis, the Headline index increased by 1.06 per cent in June 2021, this is 0.05 percentage points higher than the rate recorded in May 2021 (1.01 percent).

The urban inflation rate increased by 18.35 per cent (year-on-year) in June 2021 from 18.51 per cent recorded in May 2021, while the rural inflation rate increased by 17.16 per cent in June 2021 from 17.36 per cent in May 2021.

The composite food index rose by 21.83 per cent in June 2021 compared to 22.28 percent in May 2021.

This implies that food prices continued to rise in June 2021-but at a slightly slower rate than it did in May 2021.

The rise in the food index was driven by increases in prices of Bread and cereals, Potatoes, Yam and other Tubers, Milk, Cheese and Eggs, Fish, Soft drinks, Vegetables, Oils and fats and Meat.

On month-on-month basis, the food sub-index increased by 1.11 per cent in June 2021, up by 0.06 per cent points from 1.05 per cent recorded in May 2021.

“In June 2021, food inflation on a year on year basis was highest in Kogi (30.34%), Enugu (25.18%) and Kwara (24.78%), while Bauchi (18.97%), River (18.92%) and Abuja (17.09%) recorded the slowest rise in year on year inflation,” the report said

“On month on month basis however, June 2021 food inflation was highest in Jigawa (2.67%), Edo (2.43) and Cross River (2.16%), while Lagos (0.14%), Borno (0.06%) and Kwara (0.02% recorded the slowest rise in food inflation.”