How Food Prices and Other Factors Influenced August Inflation Rates
Financial analysts believe the drop in inflation in August is due to slower food price increases and a base effect. According to the National Bureau of Statistics (NBS), the Consumer Price Index (CPI) report for August 2024 shows that food inflation decreased from 39.53% in July to 37.52% in August. This drop is attributed to lower prices for items like tobacco, tea, coffee, groundnut oil, milk, and various tubers and vegetables.
The NBS also reported that the overall inflation rate fell by 1.25 percentage points to 32.15% in August from 33.4% in July, marking the second consecutive monthly decrease this year. However, compared to August 2023, the headline inflation rate is still higher by 6.35 percentage points. On a monthly basis, inflation increased by 2.22% in August, slightly lower than the 2.28% increase in July.
Food inflation in August 2024 was 37.52% year-on-year, up from 29.34% in August 2023. This rise is due to higher prices for bread, cereals, yams, potatoes, palm oil, and certain beverages. Month-to-month, food inflation was 2.37%, down from 2.47% in July, thanks to a slowdown in price increases for several items.
Analysts predict that inflation might rise again in the coming months due to recent fuel price increases, which could push up core inflation. The CardinalStone Research team noted that the easing was partly due to the harvest season, while the Financial Derivatives Company (FDC) suggested that the decrease was mainly due to base effects and warned that rising petrol prices might worsen inflation and impact the cost of living.
Prof. Uche Uwaleke, President of the Association of Capital Market Academics of Nigeria, believes the Central Bank of Nigeria (CBN) should stop raising the Monetary Policy Rate (MPR) and focus on supporting food production to address inflation. Clifford Egbomeade, a Public Affairs Analyst, acknowledged the slight decline in inflation but emphasized that it remains high compared to last year, highlighting ongoing issues with food security, exchange rate fluctuations, and supply chain problems.
