Nigeria's inflation rate dives to its highest in 2022

By: Damian Okonkwo

This marks a significant increase of 0.89% in the inflation rate judging from the 16.82% recorded in the previous month (April 2022) and marking the highest level since August 2021.

Added to this, the Core Consumer Price Index rose to 14.9% on a year-on-year basis, marking a 0.72% increase when with the 14.18% recorded in April 2022.

According to the statistics obtained from the Consumer Price Index (CPI), the major cause of the inflation rests with thcomparede high increase in energy and food prices.

The Nigerian inflation rate had attained its highest level ever in 2022 with the inflation data given for the just concluded month of May. According to the report released by the National Bureau of Statistics (NBS) last week's Wednesday, Nigeria's inflation rate increased to 17.71% on a year-on-year basis in May 2022.

This marks a significant increase of 0.89% in the inflation rate judging from the 16.82% recorded in the previous month (April 2022) and marking the highest level since August 2021.

Added to this, the Core Consumer Price Index rose to 14.9% on a year-on-year basis, marking a 0.72% increase when with the 14.18% recorded in April 2022.

According to the statistics obtained from the Consumer Price Index (CPI), the major cause of the inflation rests with thcomparede high increase in energy and food prices.

From a general perspective, one would have imagined that the inflation rate would diminish this month after the Central Bank raised its benchmark interest rate last month from 11.5% to 13% during its monetary policy meeting in May 2022 but the reverse had been the reality pointing to the fact that investors are losing hope in the economy.

How is the rate of Inflation measured？

Very often the major data used in measuring a country's inflation rate is its Consumer Price Index (CPI). However, economists also paid attention to the Core Consumer Price Index to determine the major sector where the inflation is coming from. Also to determine if the cause of the inflation is caused by retailers, analysts often considered the Producer Price Index (PPI).

What is Consumer Price Index (CPI)？

The Consumer Price Index is an important economic data that measures the overall changes in the prices of goods and services offered to the consumers over some time - say monthly or yearly. The changes in the CPI are the best way of measuring the inflation rate over the period conducted. Thus the high increase in the CPI MoM or YoY means a higher rate of inflation too.

On the other hand, the Core Consumer Price Index measures the overall changes in the prices of goods and services offered to consumers but excludes food and energy.

What is Inflation？

Inflation is an increase in the market prices of goods and services offered to consumers; which is caused by a devaluation of the country's currency. Often inflation is high when the country has more money in circulation and depends more on either borrowing or printing more money by the Central Bank.

What effect does it have on the Nigerian currency (Naira)？

Inflation devalues the country's currency and increases its exchange rate. This account for the increasing exchange rate for Naira over the US dollar witnessed in the foreign exchange market today, especially in the black market.