Don describes inflation drop insignificant


A Professor of Finance, Uche Uwaleke says it is difficult to interpret marginal drops in headline inflation since April to mean a sustainable downward trend in inflation rate.

This according to him, 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 an 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.”

He said in order to appreciate the practical reality, one needs to consider price changes based on month-on-month.

Quoting NBS statistics, which said headline inflation increased by 1.06 per cent in June from 1.01 per cent recorded in May month-on-month, Uwaleke said.

“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.”

The former Commissioner for Finance in Imo State urged government and CBN to scale up interventions in agriculture with adequate monitoring and evaluation mechanisms put in place.

“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.”

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