By Ademola Alawiye

Thursday, 18 Nov 2010

The inflation rate dropped for the second consecutive month in October to 13.4 per cent, from 13.6 per cent in September.

According to the National Bureau of Statistics, the inflation rate dropped due to “good harvest in the country‘s damped food prices.”

The Central Bank of Nigeria had raised its monetary policy rate to 6.25 per cent on September 21, as part of measures to reduce the inflation rate.

The NBS, on its website, said that the composite consumer price index rose by 13.4 per cent year-on-year in October, which is slightly lower than 13.6 per cent recorded in the previous month in the new CPI series.

The statement added that the monthly change of the CPI was 0.3 per cent increase when compared with September 2010.

The urban all-items monthly index rose by 0.5 per cent, while the corresponding rural index recorded 0.1per cent increase, when compared with the preceding month.

The year-on-year average consumer price level as at October 2010 for Urban and Rural dwellers rose by 11.5 and 15.0 per cent, respectively.

The percentage change in the average composite CPI for the twelve-month period ending October 2010 over the average of the CPI for the previous twelve-month period was 13.9, which was marginally higher than what was recorded by making similar comparison in September 2010.

The corresponding 12- month average per cent change for urban and rural indices rose by 10.7 and 15.8, respectively.

In a recent interview in London the CBN Governor, Mr. Lamido Sanusi, had said. ”For cosmetic reasons, it is extremely important to make sure that we attack inflation. The CBN is targeting an inflation rate of less than 10 per cent.”

Meanwhile, experts have asked the Monetary Policy Committee and the CBN to formulate a stabilisation policy regime of aggressive liquidity mop up, if a single digit inflation rate is to be achieved.

An economist, Dr. Kayode Familoni, said that the single most important goal of monetary policy was the achievement of price stability.

He said, ”If a single digit inflation rate is achieved and sustained, the government is then in a position to achieve the other goals of adequate and accelerated rate of economic goal, low rate of unemployment or full employment, equitable distribution of national income and external balance of payment equilibrium.”

Familoni noted that the monetary authorities should set up stabilisation policies in anticipation of conspicuous spending by politicians during elections.

Speaking in the same vein, Dr. Abel Awe of the Department of Economics, University of Ado-Ekiti, said double digit interest rate would further reduce the standard of living of fixed income earners.

He added, ”We are in a period of high spending by politicians. CBN should use its monetary variables to control inflation.”

Source: Punch