CBN Report Shows Rising Inflation To Weaken Economy, Hike Prices In 2021

Nigerian Economy is expected to weaken due to rising inflation, according to the Central Bank of Nigeria (CBN). The CBN conducted a survey, ‘Inflation Attitudes Survey for Q4 2020’, covering various respondents that addressed the impact of inflation on the Nigerian economy.

The survey disclosed that majority of the respondents projected rising inflation will negatively impact Africa's largest economy next year, while the respondents estimated prices will rise by at least 3 percent in the next 12 months.

It was learnt from the survey that respondents favour higher interest rates to higher inflation. Already, Nigeria's economy is in recession, athough, it had been forecasted that the country will exit recession in the first quarter of 2021, which falls between January to March.

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Factors That Contributed To Rising Inflation

In October, Nigeria's inflation rose to 14.23%, with President Muhammadu Buhari stating that by 2021, the figure will drop to 11.29%, however, Statista forecast Nigeria's inflation rate will hit 12.37% next year, this is as the country gradually reopens its land borders which have been shut for over a year - five months before the country closed to import or export due to COVID-19 pandemic.

The land border closure had influenced the rise in inflation, coupled with the COVID-19 and strong dollar. AllNews had broken down how President Buhari's land border closure decision backfired on Nigerians more than its neighbouring countries, which Buhari was targeting.

Rising Inflation To Hit Price Of Goods And Services

Meanwhile, another CBN report, report on ‘consumer expectations survey for Q4 2020’ stated that prices of goods and services have been projected to rise within January to December 2021.

CBN stated that the projected inflation in goods and services will be driven by savings, food and other household needs, education, purchase of appliances/ durables, purchase of car/motor vehicle, and purchase of houses.

The report further disclosed that Nigerians expect an hike in credit rates and unemployment rate in the next 12 months, while naira was projected to appreciate next year.

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Inflaton In Goods And Services Price Follows That Of Food

The increase in prices of goods and services follows the food inflation price index released by the Nigerian Bureau of Statistics (NBS), which disclosed an hike in November 2020 food prices.

According to the NBS report, the highest inflation rate within last month were recorded in prices of Bread & Cereals, Fish, Potatoes, Yam and other Tubers, Vegetables, Meats, Oil & Fats, and Fruits.

Food Price Index rose in November by 18.30% Year-on-Year from 17.38% in October 2020. For a Month-on-Month period, the Food Index rose by 2.04% in November, from 1.96% in October.

According to the NBS Consumer Price Index report for Month-on-Month, the Headline Inflation rose byb1.60% in Novembed 2020 from 1.54% in Octover 2020. Core Inflation stood at 0.71% in November 2020 from 1.25% in October 2020.