New Electricity Tariff, VAT Rate To Sustain Upward Pressure On Prices

 New Electricity Tariff, VAT Rate To Sustain Upward Pressure On Prices

Nigeria’s annual inflation rate rose for the ninth consecutive months to 12.4 percent in May from 12.34 percent in April, the highest in  25 months, with analysts projecting that the upward trend will persist, driven by the commencement of the new electricity tariff and Value Added Tax (VAT) as well as the new planting season.

The inflation rate has been on the up-trend, from 11 percent in September last year, initially driven by the effect of the border closure but now compounded by the effect of the Coronavirus (COVID-19) induced restrictions across the country.

In its Consumer Price Index report for May 2020, the Nigeria Bureau of Statistics, NBS, said, “The consumer price index, (CPI) which measures inflation increased by 12.4 percent, year-on-year, YoY, in May 2020.

This is 0.06 percentage points higher than the rate recorded in April 2020 (12.34%).” The report further stated: “Increases were recorded in all Classification of Individual Consumption According to Classes (COICOP) divisions that yielded the Headline index.

“On a month-on-month basis, the headline index increased by 1.17 percent in May 2020, which is 0.15 percent higher than the rate recorded in April 2020 (1.02%).

“The percentage change in the average composite CPI for the twelve months period ending May 2020 over the average of the CPI for the previous twelve months period was 11.79 percent, showing 0.08 percent point from 11.71 percent recorded in April 2020.”

Analysts react

Attributing the higher inflation rate in May to the continued depreciation of the naira, analysts at Cowry Assets said: “The higher inflation rate was partly due to a rise in imported food index by 16.26 percent (higher than 16.24 percent in April) –  against the backdrop of further depreciation of the naira  against the dollar.”

Projecting continued rise in the inflation rate in the coming months, they said: “We expect the general price level in the coming months to further increase amid  current planting season and in view of the planned increase in electricity tariff kicks off later in the year.”

On their part, analysts at United Capital Plc attributed higher inflation rate to the impact of the restriction of interstate movements, border closures on the supply chain as well as the impact of foreign exchange scarcity drove up the price of imported foods.

Tolani Giwa

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.