The National Bureau of Statistics (NBS) has released July inflation numbers on Friday, showing a decline by 0.14% to 11.08%.
Nigeria remains the country with the 8th highest inflation in the African continent. In the region, average inflation in 2019 is projected to be 8.4%. Nigeriaâ€™s inflation has consistently been above the regional average in the past few years.
However, it is worth mentioning that food inflation dropped to 13.39% from 13.56% in June. In the last year, the food basket has been mostly responsible for the direction of inflation.
This is because it accounts for more than 50% of the weight in the general basket. The food index declined by approximately 0.60% in the last two months due to a number of factors including a favourable harvest.
However, other inflation stoking factors that have been benign are likely to become potent in August and September. These factors include, the minimum wage implementation and the adjustment in the exchange rate for computing custom duty which moved to N326/$ from N305/$. Assuming that 60% of all goods imported attract a duty, the shift from N305/$ to N326/$ will have a pass through effect of approximately N25.7bn. The apex bank is also contemplating adding dairy products to the list of items restricted from forex. Annual dairy imports is estimated at $1.2bn.
In recent times, the President directed the CBN to prohibit forex access for all food imports. This could push up commodity prices and stoke inflation. In Q1’19, food imports was estimated at $1.1bn, 10.7% of total imports. Imported food inflation in Q2 was 15.72%, 2.04% higher than domestic food inflation.