As the headline inflation for April drops by 0.5 per cent to 18.12 per cent in April, Managing Director of Financial derivatives Limited, Mr. Bismark Rewane has said the economy would start to record appreciable growth as economic activities resume fully in the country with the relaxation of the Coronavirus (Covid-19) pandemic restrictions in the country. He said the challenge however is the third wave of the COVID-19 pandemic ravaging parts of the world.
This development, he said, would still hold down the growth of the world economy and full resumption of activities across the world. To this end, Rewane, in a telephone interview at the weekend, disclosed that a commodity country like Nigeria, which is about 90 per cent dependent for its foreign exchange from export of crude oil, will still be in grave danger this year.
Speaking against backdrop of the marginal positive shift in the inflationary rate in April, he stated the economy will record appreciable growth during the year if the Federal Government is able to contain the rising security challenge across the country.
However, a Professor of Political Economy, Pat Utomi, said the state of insecurity in the country is so scary and disruptive that it would be difficult for the economy to come out of the woods this year.
He said: “Even if the government is able to bring the ugly situation under control this year, farmers have to return to their farms; investors (local and foreign) will need confidence building for them to return to the country, including the portfolio investors. So, it will take some time.”
He added that Nigeria has not actually come out of recession, as the country’s two digit inflation has remained close to 20 per cent. Speaking in the same vein, the Chief Executive Officer of Economic Associates, Dr Ayo Teriba, cautioned that the inflationary rate which at 18.17 per cent in March slowing down by a mere 0.5 per cent is not something to celebrate.
He said there is yet no change in the economic situation of the country. According to him, the 0.5 per cent positive shift in the inflationary trend is similar to the 0.11 per cent GDP growth recorded in the Q4 2020 which is being celebrated in some quarters as indicative of the country’s exit from recession.
He said that the Nigerian economy went through very serious difficulties in 2020 due to the unexpected and unimagined COVID- 19 pandemic, which brought the global economy to its knees.
“However, we are hopeful that the worse is over in view of the third wave of the Coronavirus currently ravaging many countries of the world. But we are still facing the problem of insecurity in the country, which is threatening the very existence.
Economy in gloomy outlook
With the COVID-19 pandemic still ravaging parts of the world, specifically India, Nigeria’s major crude customer, Teriba and Utomi say revenue to the mono economy Nigeria is still unpredictable.
This come as it was disclosed that Nigeria’s crude oil production volume has been revised downwards from the 2.18 million barrels per day (mbpd) in the 2021 Budget to 1.9 mbpd (out of which 400kbpd is condensate). This reflects recent oil output cut by the OPEC and its allies to stabilize the world oil market which put Nigeria’s quota at 1.48mbpd, excluding condensates. Oil production averaged 2.1mbpd in the first two months of the year before the collapse in demand and price as most economies went into lockdown.
It was as low as 1.75 mbpd in April because of low demand. This came on the heels of crude oil producers experiencing great difficulty in selling crude cargoes, resulting in heavy price discounting to attract buyers.
Nevertheless, the lower production volume has not brought down the landing cost of petrol in Nigeria as indication from the Petroleum Products Marketing Company (PPMC) showed that the landing price is in the region of N420 per litre. Hence, NNPC will continue to subsidise the product at the cost of its contributions to the Federal Accounts Allocation Committee (FAAC).
Meanwhile, Teriba insists that the Nigerian economy remains technically in recession, saying government revenues particularly non-oil revenues could remain depressed this year. This means that the government will still need to rely on debt borrowing to fund its budget.
Experts also said that these challenges confronting the economy also suggested that the government may have to rely on funding from the Central Bank of Nigeria (CBN) to meet its revenue shortfalls. The government has in the past relied on the CBN to fund recurrent expenditure as it repays with future oil inflows.
All item index of April inflation
The Consumer Price Index, (CPI) which measures inflation increased by 18.12 per cent (year-on-year) in April 2021. This is 0.05 per cent points lower than the rate recorded in March 2021 (18.17) per cent. On month-on-month basis, the Headline index increased by 0.97 per cent in April 2021. This is 0.59 per cent rate lower than the rate recorded in March 2021 (1.56) per cent. The percentage change in the average composite CPI for the 12 months period ending April 2021 over the average of the CPI for the previous 12 months period was 15.04 per cent, showing 0.48 per cent point from 14.55 per cent recorded in March 2021.
The urban inflation rate increased by 18.68 per cent (year-on-year) in April 2021 from 18.76 per cent recorded in March 2021, while the rural inflation rate increased by 17.57 per cent in April 2021 from 17.60 per cent in March 2021.
On a month-on-month basis, the urban index rose by 0.99 per cent in April 2021, down by 0.61 the rate recorded in March 2021 (1.60), while the rural index also rose by 0.95 per cent in April 2021, down by 0.57 the rate that was recorded in March 2021 (1.52) per cent.
The corresponding 12-month year-on-year average percentage change for the urban index is 15.63 per cent in April 2021. This is higher than 15.15 per cent reported in March 2021, while the corresponding rural inflation rate in April 2021 is 14.48 per cent compared to 13.99 per cent recorded in March 2021.
Food index
The composite food index rose by 22.72 per cent in April 2021 compared to 22.95 per cent in March 2021. This rise in the food index was caused by increases in prices of Coffee, tea and cocoa, Bread and cereals, Soft drinks, Milk, cheese and egg, Vegetable, Meat, Oils and fats, Fish and Potatoes, yam and other tubers.
On month-on-month basis, the food subindex increased by 0.99 per cent in April 2021, down by 0.91 per cent points from 1.90 per cent recorded in March 2021. The average annual rate of change of the Food sub-index for the 12-month period ending April 2021 over the previous 12-month average was 18.58 per cent, 0.65 per cent points from the average annual rate of change recorded in March 2021 (17.93) per cent.
All items less farm produce
The “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 12.74 per cent in April 2021, up by 0.07 per cent when compared with 12.67 per cent recorded in March 2021. On month-on-month basis, the core subindex increased by 0.99 per cent in April 2021.
This was down by 0.07 per cent when compared with 1.06 percent recorded in March 2021.
The highest increases were recorded in prices of Pharmaceutical products, Vehicle spare parts, Hairdressing salons and personal grooming establishment, Garments, Furniture and furnishing, Medical services, Shoes and other foot wears, Motor cars, Major household appliances whether electric or not, Dental services, Hospital services, Nondurable household goods and Fuel and lubricants for personal transport equipment.
The average 12-month annual rate of change of the index was 11.25 per cent for the 12-month period ending April 2021; this is 0.24 per cent points higher than 11.01 per cent recorded in March 2021.
– New Telegraph