Prices of general goods and services in Nigeria will remain high as inflationary pressures are expected to persist in 2021, says the Nigerian Economic Summit Group (NESG).
Continued increment in the prices of general goods and services, NESG posits in its recently published report will come on the back of renewed petrol pricing and increased electricity tariffs.
According to the group, increasing inflation rates is something the Federal government will have to contend with in 2021 as inflationary pressures such as foreign exchange challenges, insecurity, the increase in price of petrol and electricity tariff and supply chain disruptions which contributed to high inflation in 2020 are still in existence with the exception of the closure of the nation’s land borders.
“Following the removal of petroleum subsidy, for instance, petrol prices went as high as N167 (Ghs 2.46 or $0.42) per litre in December 2020, recovery of crude oil prices on the international market could also translate into higher petrol prices for Nigerians,” stated the report.
“This is a crucial issue that policymakers will have to contend with in 2021. In addition, the upward adjustment in electricity tariff will fully manifest in 2021 as businesses are still adjusting to COVID-19. Also, some of the provisions that came with the finance bill especially the increase in VAT from 5 percent to 7.5 percent will continue to influence the price level going forward,” added the report.
Inflationary pressures in 2020 NESG says were driven by a combination of factors including the closure of Nigeria’s land borders, foreign exchange challenges, insecurity, the increase in price of petrol and electricity tariff and supply chain disruptions.
Nigeria begun 2020 with a 12.1 per cent inflation rate and ended the year with an inflation rate of 15.8 per cent.
Exchange rate in 2020 faced intense pressure, which led to series of devaluations of the Naira as external reserves depleted, foreign investment inflows declined and oil receipts plummeted.
Nigeria’s 12 consecutive quarters of positive GDP growth was halted as the economy contracted by 6.1 percent and 3.6 percent in the second and third quarters of 2020 respectively, triggering a second recession in the space of five years.
