Nigerians fear weaker economy from rising inflation – CBN report
Respondents in a survey carried out by the Central Bank of Nigeria’s Statistics Department in the fourth quarter of 2018, showed that more Nigerians were sceptical of the country having a weaker economy from rising inflation.
The CBN said the Inflation Attitudes Survey was conducted between November 24 – December 7, 2018 from a sample size of 1,770 households, randomly selected from 207 enumeration areas across the country, with a response rate of 99.2 per cent.
The report stated, “Respondents were asked what would become of the Nigerian economy if prices started to rise faster than they do now. The survey result showed that 44 per cent of the respondents believed that the economy would end up weaker, 14.2 per cent stated that it would be stronger, 18.3 per cent of the respondents believed it would make a little difference, while 22.8 per cent did not know.”
According to the report, the responses opined considerable support for price stability, as majority (44 per cent) agreed that the economy will end up weaker.
It said the results were consistent with the notion that inflation constrained economic growth.
When asked how prices had changed over the past 12 months, respondents gave a median answer of 3.8 per cent.
Of the total respondents, 23.9 per cent thought prices had gone down or not changed, 53.7 per cent felt that prices had risen by at least three per cent, while 17 per cent felt that prices inched up by more than one per cent, but less than three per cent.
Those that had no idea were 5.3 per cent, according to the report.
It report read in part, “The median expectation of price changes over the next 12 months was that prices will inch up by 2.3 per cent. From the total responses, 48.2 per cent of the respondents expected prices to rise by at least three per cent over the next 12 months, 14.3 per cent expected prices to increase by more than one per cent, but less than three per cent.
“However, 30.9 per cent of the respondents were optimistic that prices over the next 12 months will either go down or remain the same.”
On interest rates, it stated that the percentage of respondent households that felt that interest rates had risen in the last 12 months declined by 0.7 points to 28.6 points in the current quarter when compared to 29.3 points attained in Q3, 2018.
On the other hand, nine per cent of respondents believed that interest rates had fallen, 16.8 per cent of the respondents were of the opinion that the rates stayed about the same in the last 12 months, while 45.6 per cent of the households had no idea.
The result revealed that more households had no idea on the direction of interest rate in the past 12 months. On the expected change in interest rates on bank loans and savings over the next 12 months, some respondents (23 per cent) were of the view that the rates would rise, while 17.4 per cent believed that the rates would fall.
However, more respondents (59.6 per cent) of the respondents either expected no change or had no idea.
Furthermore, respondents were asked whether it would be best for the Nigerian economy if interest rates increased or decreased. The results showed that 33 per cent indicated that it would be best for the Nigerian economy if interest rates fell, while 11.1 per cent opted for higher interest rates.
Those that thought that it would make no difference accounted for 12.7 per cent, while 40.2 per cent had no idea.
The responses revealed that while many of the respondents favoured lower interest rates for the Nigerian economy, many more had no idea whether it should rise or fall.
On interest rate-inflation nexus, the report showed that 35.2 per cent thought a rise in interest rates would make prices in the street rise slowly in the short term, as against 11.5 per cent that disagreed.
In the medium term, 33.6 per cent agreed that a rise in interest rates would make prices in the street rise slowly, 12.8 per cent disagreed.
Respondents were asked to choose between raising interest rates in order to keep inflation down and keeping interest rates down to allow prices to rise.
Responding, 21.5 per cent preferred interest rates to rise in order to keep inflation down compared to 25.4 per cent that said they would prefer prices to rise faster, while 50.9 per cent had no idea.
“These responses suggest that given a trade-off, more of the respondents will prefer higher interest rates to higher inflation, which is suggestive of the respondent households’ support for the bank’s price stability objective,” the report added.