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Lockdown: Inflationary pressure mounts in April

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By Emeka Anaeto, Business Editor

Current updates on the impact of the Coronavirus (COVID-19) pandemic on the Nigerian economy indicate a worsening inflation amidst other challenges.

The March 2020’s Consumer Price Index report published last week by the National Bureau of Statistics, NBS, showed a sustained uptrend in headline inflation to 12.3 percent Year-on-Year, Y-o-Y, from 12.2 percent in February 2020. Though this is the seventh consecutive month of increase since August 2019 and the highest level since April 2018, analysts believe the COVID-19 elements which were still mild as at March would pressure April figures and many months afterwards.

Even at that, the marginal rise in the March figure, the analysts say, suggests a muted transmission of the recent VAT increase as well as exchange rate pressures.

Analysts at Afrinvest West Africa, a Lagos based investment house, stated: ‘‘We believe this can be explained by the social distancing measures taken to slow the spread of COVID-19, which has reduced economic activity and consumer spending.’’
Looking through the March figures the analysts further stated: ‘‘The broad-based increase in Month-on-Month, M-o-M, inflation indicates a slight resurgence of consumer price pressures following the moderation in February 2020.

‘‘Going forward, we anticipate increased pressure on domestic consumer prices, mainly food. Our expectation is driven by the disruption to the agriculture value chain amid the lockdown as well as the lean season when there is usually reduced agriculture output. ‘‘But we believe there would be a faster-paced increase in inflation once the lockdown measures are relaxed and economic activity resumes. ‘‘Also, we see imported food inflation rising sharply once the current global supply chain disruptions reduce.
‘‘Until then, the pass-through of trade restrictions, exchange rate weakening and the recent VAT increase to consumer prices would be muted.’’

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