Inflation rate driven by transport cost, says finance minister

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has said the inflation rate in Nigeria is largely driven by the cost of transportation.

The country has seen an increase in transport costs in recent months largely on the back of the hikes in the pump price of petrol, used by many commercial transporters to power their vehicles.

In what is the latest in a series of petrol price hikes since July, fuel marketers on Friday raised the pump price of the product following an increase in the ex-depot price.

Ahmed, who spoke on Friday at a virtual consultation and stakeholder engagement to discuss the economic and fiscal policy drivers underpinning the Finance Bill 2020, said the draft bill sought to reduce transportation cost in the country.

The average transport fare paid by commuters for bus journey within a city increased by 12.70 per cent month-on-month and 48.02 per cent year-on-year to N278.88 in August, the latest data from the National Bureau of Statistics showed.

Ahmed said the bill contained ‘some interesting new proposals,’ citing ‘fiscal relief for mass transit…which is designed to provide support to mass transit by reviewing the duties regime’ as an example.

The minister said, “The essence why this is being done is we recognise transportation as one of the major cost drivers in the economy.

“If you look at the rate at which our inflation is going, and you disaggregate the components, you will find that inflation is largely driven by transport cost.

“So, the essence here is to reduce transportation cost so that businesses will have ease and pass benefits to eventual consumers.”

The nation’s inflation rate rose to 13.71 per cent in September from 13.22 per cent a month earlier, according to the NBS.

Analysts at Financial Derivatives Company Limited, led by foremost economist Bismarck Rewane, said last week that headline inflation was projected to rise to 14.5 per cent in October from 13.71 per cent in September.

“This means that inflation will be rising for the 14th consecutive month. It would also be the highest level in 33 months. Food inflation will be the most affected as it is estimated to climb to 17.05 per cent. Other sub-indices are also expected to move in the same direction,” they said.

The Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, said recently that the rising inflation in the country and the contraction of the economy had created a dilemma for policymaking and foreboded the need to strengthen the productive base of the economy.

-Punch