Inflation Rate Surges in July to 12.82% Amid High Unemployment Rate

Prices of goods and services in Nigeria rose further in the month of July, according to the latest report from the National Bureau of Statistics (NBS).

The Consumer Price Index, which measures inflation in an economy, increased by 12.82 percent year-on-year in July. This was 0.26 percent more than the 12.56 percent recorded for the month of June and represents the highest rate of increase since April 2018.

On a monthly basis, inflation rose by 1.25 percent in July, representing an increase of 0.04 percent from 1.21 percent achieved in June.

Nigeria’s inflation has now risen for 28 consecutive months despite efforts by both the Federal Government and Central Bank of Nigeria to curb the persistent increase in prices.

The Food Index rose by 15.48 percent in the same month, up from 15.18 percent filed in the month of June. The report attributed the increase to the surge in prices of Bread and cereals, potatoes, yam and other tubers, meat, fruits, oils and fats, and fish in July.

Economic uncertainties amid dwindling foreign reserves plunged Nigeria’s dollar liquidity and negatively impacted the entire economic outlook due to how the economy is structured.

Nigeria is an import-dependent economy, meaning the economy depends on foreign revenue to make available import goods or service its huge population of about 200 million people.

Therefore, the inability of businesses to access the US dollar to import necessary raw materials and offset foreign loans has led to a massive unemployment rate and a broad-based decline in consumer spending.

The nation’s unemployment rate rose from 23.1 percent in the third quarter of 2018 to 27.1 percent in the second quarter of 2020. Suggesting that businesses, especially those that depend on import goods for operations, are no longer employing or creating new jobs.

This was evident in the purchasing managers index released by the central bank last month. In the report, new job creation in the sector declined due to limited dollar availability and disruption of the global supply chain by the COVID-19 pandemic.

In turn, the scarcity plunged the Naira to a record low of N475 against the United States dollar on the black market, forcing the central bank to devalue the local currency (official rate) to N360/$ to better ease pressure on the weak foreign reserves.

All these, coupled with the lack of clear economic direction and rising debt servicing to GDP ratio negatively impacted Nigeria’s capital importation necessary to supplement foreign reserves.