Cobham : Inflation Attitude Survey Report for the Fourth Quarter of 2019

Central Bank of Nigeria

Statistics Department

Inflation Attitudes

Survey Report

Q4 2019

December1 2019

	Table of Contents
1.0	Highlights	3
2.0	Introduction	3
3.0	About the Survey	3
4.0	Inflation	3
5.0	Interest Rates	4
6.0	Interest Rate-Inflation Nexus	5
7.0	Opinions on the Central Bank of Nigeria	6

Charts
Figure 1: Households' perception/expectations of price changes in the past one
year/next one year	4
Figure 2: Households' perception/expectations of interest rate changes in the
Past one year/next one year	4
Figure 3: Households' opinions on the impact of interest rate changes on households
and on the Nigerian economy	5
Figure 4: Households' perception of the impact of interest rate changes on prices in the
Short and medium term	5
Figure 5: Households' assessment of CBN's role in controlling inflation	6

Tables

Table 1: Inflations Attitudes Survey data

7

2

A Quarterly Publication of the Central Bank of Nigeria

4th Quarter, 2019

1.0 Highlights

The highlights of the Q4 2019 IAS are as follows:

• Respondents believe that the economy would end up weaker if prices start to rise faster than they do now.
• Given a trade-off between inflation and interest rates, more respondents prefer interest rates to fall, while inflation rate rises.
• While some of the respondents are aware that the CBN influences the direction of interest rates to control inflation, majority have no idea.

2.0 Introduction

The Central Bank of Nigeria (CBN), aside from its price and monetary stability mandate, is also tasked with supporting Government's policies on economic growth and unemployment reduction. One of the objectives of the Bank is to build public confidence and support for sustainable economic development and public understanding of the Monetary Policy Committee's roles. This is because the understanding and support by the public towards attaining the objectives of price stability would provide an environment conducive for achieving macro-economic stability.

Since June 2009, the Statistics Department conducts the inflation attitudes survey on quarterly basis, to sample the views of households on how they view the price changes of goods and services in the last twelve months, and their expectations of price changes over the next twelve months. Respondents' opinions were used to explore the general public's understanding of monetary policy framework. This is because inflation expectations and public understanding of what influences them are important parameters for successful monetary policy formulation. Good estimates of inflation expectations and the level of public understanding of the underlying factors would assist the Bank to assess the impact of its efforts in maintaining price stability in the Nigerian economy.

3.0 About the Survey

The Q4 2019 Inflation Attitudes Survey was conducted during the period November 18 - 27, 2019 from a sample size of 2070 Households randomly selected from 207 Enumeration Areas (EAs) across the country, with a response rate of 99.9 per cent.

4.0 Inflation

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 50.1 per cent of the respondents believed that the economy would end up weaker, 6.7 per cent stated that it would be stronger, 20.9 per cent of the respondents believed it would make a little difference, while 22.3 per cent did not know. The responses showed considerable support for price stability, as majority (50.1 per cent) agreed that the economy will end up weaker. This is consistent with the notion that inflation constrains economic growth.

When asked how prices have changed over the past 12 months, respondents gave a median

3

answer of 0.1 per cent. Of the total respondents, 15.1 per cent thought prices had gone down or not changed, 59.5 per cent felt that prices had risen by at least 3.0 per cent, while 21.2 per cent felt that prices inched up by more than 1.0 per cent, but less than 3.0 per cent. Those that had no idea were 4.1 per cent.

The median expectation of price changes over the next 12 months was that prices would inch up by 3.0 per cent. From the total responses, 47.8 per cent of the respondents expected prices to rise by at least 3.0 per cent over the next 12 months, 19.3 per cent expected prices to increase by more than 1 per cent, but less than 3 per cent. However,

28.0 per cent of the respondents were optimistic that prices over the next 12 months would either go down or remain the same (Fig. 1, Table 1).

80.0

Public Perception Inflation Index

80.0

Public Expectation Inflation Index

70.0

70.0

60.0

60.0

Index

50.0

50.0

Diffusion

40.0

40.0

30.0

30.0

20.0

20.0

10.0

10.0

0.0

0.0

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Fig. 1: Households perception/ expectations of price changes in the past one year/ next one year

Diffusion Index

5.0 Interest Rates

The percentage of respondent households who felt that interest rates had risen in the last 12 months increased by 3.4 points to 27.6 points in the current quarter when compared to 24.2 points attained in Q3, 2019. On the other hand, 7.6 per cent of respondents believed that interest rates had fallen, 20.0 per cent of the respondents were of the opinion that the rates risen in the last 12 months, while 44.1 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 (24.8 per cent) were of the view that the rates will rise, while 15.1 per cent believed that the rates will fall. However, more respondents (60.1 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 rise or fall. The results showed that 39.0 per cent indicated that it would be best for the Nigerian economy if interest rates fell, while 5.2 per cent opted for higher interest rates. Those that thought that it would make no difference accounted for 16.2 per cent, while 39.5 per cent had no idea (Table1). These responses revealed that, while many of the respondents favored lower interest rates for the Nigerian economy, many more had no idea whether it should rise or fall (Fig 2).

60.0

60.0

Public Perception Interest Index

50.0

Public Expectation Interest Index

50.0

DiffusionIndex

40.0

40.0

DiffusionIndex

20.0

20.0

30.0

30.0

10.0

10.0

0.0

0.0

-10.0

-10.0

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Fig. 2: Households perception/ expectations of interestrate changes in the past one year/ next one year

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6.0 Interest Rate-Inflation Nexus

0.0

Interest rate diffusion Index: Household

-5.0

Interest rate diffusion Index: Household

Responses on what the impact of a rise in

-10.0

interest rates in the short and medium terms

Index

would have on prices showed that 37.3 per

-15.0

cent thought a rise in interest rates would

Diffusion

-20.0

make prices in the street rise slowly in the

-25.0

short term, as against 9.6 per cent that

-30.0

disagreed. While in the medium term, 35.4

per cent agreed that a rise in interest rates

-35.0

would make prices in the street rise slowly,

-40.0

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015 Q2 2015

Q3 2015

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

Q4 2018 Q1 2019

Q2 2019

Q3 2019

Q4 2019

11.5 per cent disagreed (Fig. 3).

Fig. 3: Households perception/ expectations of interest rate changes in the past one year/ next one year

Respondents were asked to choose between

50.0

50.0

raising interest rates in order to keep

45.0

45.0

inflation down, and keeping interest rates

40.0

40.0

down to allow prices to rise. Responding,

IndexDiffusion

35.0

35.0

IndexDiffusion

19.0 per cent preferred interest rates to rise

30.0

30.0

in order to keep inflation down while 38.1

per cent said they would prefer prices to

25.0

25.0

rise faster, 42.9 per cent of the respondent

20.0

20.0

had no idea.

15.0

Short Term Interest Rate -

15.0

Price Nexus

These responses suggest that given a trade-

10.0

Medium term Interest

10.0

5.0

Rate - Price Nexus

5.0

off, more of the respondents would prefer

higher interest rates to higher inflation,

0.0

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q3 2018

Q4 2018

Q1 2019

Q2 2019

0.0

Q1 2014

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2019

Q4 2019

which is suggestive of the respondent

households' support for the Bank's price

Fig. 4: Households perception of the impact of interest rate rise on prices in short and medium term

stability objective (Fig. 4).

7.0 Opinions on the Central Bank of Nigeria

To assess whether people are aware of the way monetary policy works in Nigeria, respondents were asked if they knew which group of people meet to set Nigeria's monetary policy rate. Responding, 21.7 per cent felt it was the Monetary Policy Committee, 8.4 per cent felt it was the Federal Ministry of Finance, 29.9 per cent believed it was the Government, 3.3 per cent felt it was the National Assembly, while 0.9 and 35.8 per cent answered, 'others' and 'do not know', respectively.

When asked to identify which group mostly influences the direction of interest rates, the result indicated that 39.9 per cent of the respondents were aware that the Central Bank of Nigeria influences the direction of interest rates. However, 8.6 per cent stated that it was the Government ministers, 4.1 and 13.1 per cent were of the opinion that civil servants and banks influence the rates, respectively. Majority of the respondents (34.3 per cent) had no idea.

On what best describes the Monetary Policy Committee, 27.8 per cent felt it was influenced by the Government, 10.4 per cent felt it was the federal ministry of finance, and 6.6 per cent believed that it was the national assembly, while 14.6 per cent thought it was not influenced by any arm of government and 40.6 percent had no idea.

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Respondents were asked how satisfied they were with the CBN's management of interest rates in Nigeria. The net satisfaction index, which is the proportion satisfied less the proportion dissatisfied, stood at 2.5 per cent. Among the satisfied group, 4.0 per cent were 'very satisfied', while 21.9 per cent were 'fairly satisfied'. However, 18.1 per cent were 'neither satisfied nor dissatisfied' whereas 12.6 per cent were 'very dissatisfied'. Those who had no opinion accounted for 32.6 per cent of the respondents (Fig. 5).

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Customer Satisfaction Index

					Q4 2019	Q3 2019
Very dissatisfied
Fairly dissatisfied
Neither satisfied nor
dissatisfied
Fairly satisfied
Very satisfied
0.0	5.0	10.0	15.0	20.0	25.0
				Percent
Fig. 5: Households assessment of CBN on its role in controlling inflation

ANNEX: TABLES

TABLE 1

INFLATION ATTITUDES SURVEY DATA

	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Q.1 Generally, price of items that were sold N1,000 a year ago now sells for
Less than N1000	2.3	7.6	10.8	8.6	8.7	11.6	14.7	15.5	9.7	8.2	10.0	6.3
N1000	6.9	14.4	15.3	6.7	7.5	6.6	8.7	8.4	11.4	11.0	9.1	8.8
N1010 to N1030	11.1	13.9	17.9	15.5	16.9	17.5	13.5	17.0	19.6	28.4	22.0	21.2
Above N1030	62.1	52.1	45.2	62.6	61.2	58.0	56.5	53.7	56.7	49.6	54.9	59.5
No idea	17.6	11.8	10.8	6.6	5.8	6.3	6.5	5.3	2.6	2.8	3.8	4.1
Median (%)	6.8	4.2	3.1	5.1	4.7	4.3	4.5	3.8	3.8	3.1	0.1	4.1
Q. 2 How much will you expect prices of items that are currently sold for N1,000 to change in the next 12
Less than N1000	21.23	30.2	27.8	35.4	29.1	24.3	28.4	22.5	22.3	19.2	17.7	15.3
N1000	12.1	15.9	18.8	8.5	7.8	7.6	8.5	8.4	12.3	12.2	12.4	12.7
N1010 to N1030	16.6	17.7	19.1	13.6	14.2	15.8	12.5	14.3	16.5	22.1	20.4	19.3
Above N1030	30.6	21.6	20.0	33.0	41.1	43.9	40.8	48.2	44.2	43.3	44.0	47.8
No idea	19.5	14.7	14.3	9.5	7.8	8.4	9.6	6.4	4.7	3.2	5.4	5.0
Median (%)	1.8	0.6	0.6	1.2	2.3	2.8	2.3	2.3	2.3	2.3	2.7	3.0

Q. 3 If prices started to rise faster than they do now, do you think Nigeria's economy would…?

End up stronger	13.5	13.4	12.1	11.3	11.6	11.0	12.1	14.2	8.1	5.3	6.4	6.7
Make little difference	18.61	20.3	23.7	21.4	16.2	17.7	17.7	18.3	20.7	22.3	19.5	20.9
Be weak	50.4	50.0	47.0	57.2	54.7	49.7	48.4	44.0	49.3	51.5	52.9	50.1
Don't know	17.4	16.3	17.1	10.1	17.2	21.5	21.6	22.8	21.9	20.9	21.2	22.3

Q. 4 What do you think of this year's Governmentrate anticipated inflation rate?

Too high	39.9	38.9	35.9	42.6	30.8	27.2	30.0	26.4	16.5	14.4	17.5	19.7
Too low	17.2	18.3	18.3	18.2	17.2	14.3	16.6	19.7	16.4	15.8	14.9	15.6
About right	20.9	19.4	20.0	20.5	14.9	19.5	19.3	22.0	17.7	22.2	20.0	20.9
No idea	22.0	23.3	25.6	18.6	37.0	38.7	33.8	31.6	49.4	47.6	47.5	43.8

Q. 5 How has interest on bank loans changed over the last 12 months?

Risen significantly	30.03	30.9	28.4	28.9	14.8	14.5	14.8	14.9	6.0	4.3	4.4	5.9
Risen marginally	24.58	22.8	22.0	27.4	16.8	17.9	14.5	13.7	16.2	21.1	19.8	21.7
No change	16.04	16.6	19.2	15.4	15.3	17.0	18.1	16.8	17.9	18.7	20.0	20.8
Fallen marginally	8.2	7.1	8.5	4.7	4.5	5.4	4.7	6.4	4.9	4.6	6.5	6.2
Fallen significantly	4.78	4.1	4.3	3.4	4.3	2.0	2.3	2.6	2.4	2.7	1.6	1.4
No idea	16.4	18.6	17.5	20.2	44.3	43.2	45.4	45.6	52.6	48.6	47.6	44.1
Total saying 'rise'	54.6	53.7	50.4	56.3	31.6	32.4	29.3	28.6	22.2	25.4	24.2	27.6
Total saying 'fall'	13.0	11.2	12.8	8.1	8.8	7.4	7.0	9.0	7.3	7.3	8.1	7.6
Net rise	41.7	42.5	37.6	48.2	22.8	25.0	22.3	19.6	14.9	18.1	16.1	20.0

Q. 6 How would you expect interest rates to change over the next 12 months?

Rise a lot	16.4	14.0	14.4	15.2	12.2	11.0	10.0	10.0	5.4	4.3	4.9	7.5
Rise a little	21.85	21.9	20.2	21.7	14.7	15.6	13.5	13.0	14.5	17.6	16.5	17.3
Stay about the same	17.38	17	17.7	15.8	13.2	16.3	17.3	13.5	15.5	16.6	17.8	17.8
Fall a little	18.71	20.5	20.4	17.7	10.9	9.7	7.9	11.0	9.6	8.4	9.9	9.5
Fall a lot	10.5	11.7	12.8	12.7	6.6	5.9	6.7	6.4	4.8	6.8	4.8	5.6
No idea	15.06	15	14.4	16.8	42.4	41.5	44.5	46.1	50.1	46.3	46.0	42.3
Total saying 'rise'	38.3	35.9	34.6	36.9	26.9	26.6	23.5	23.0	19.9	21.9	21.4	24.8
Total saying 'fall'	29.3	32.2	33.2	30.4	17.5	15.6	14.6	17.4	14.4	15.2	14.7	15.1
Net rise	9.0	3.7	1.4	6.5	9.4	10.9	8.9	5.6	5.5	6.7	6.7	9.7

Q. 7 What do you think would be best for the NIgerian economy, for lending interest rates to rise or to fall?

Go up	19.1	16.2	16.4	19.6	13.3	12.8	15.6	11.1	5.9	4.9	6.5	5.2
Go down	40.3	45.2	45.1	54.3	41.5	37.2	34.4	33.0	34.8	32.7	37.9	39.0
Make no difference	23.2	21.4	23.3	11.7	8.5	13.2	11.1	12.7	14.6	18.1	14.6	16.2
No idea	17.3	17.1	15.1	14.0	36.4	35.0	38.3	40.2	44.7	44.3	40.6	39.5

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TABLE 1 (CONT'D)

INFLATION ATTITUDES SURVEY DATA

	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Q. 8 Do you agree with the following statements? A rise in interest rates would make prices in the street rise slowly
in the short term - say a month or two
Agree strongly	22.1	23.0	22.1	21.8	13.1	15.0	11.2	10.4	5.4	7.3	8.6	7.5
Agree	29.8	32.5	30.9	34.4	27.1	24.9	25.2	24.8	30.2	28.2	30.5	29.8
Neither agree nor disagree	18.6	18.4	20.0	15.3	12.6	10.0	11.9	12.8	15.4	17.9	16.0	18.3
Disagree	13.8	10.7	12.8	11.9	9.2	10.0	9.6	8.5	5.9	6.0	6.0	7.2
Disagree strongly	4.0	4.2	3.8	5.3	3.2	4.0	5.1	3.0	2.3	2.1	3.1	2.4
Don't know	11.7	11.3	10.4	11.3	34.9	36.1	37.0	40.5	40.8	38.4	35.7	34.9
Total agree	51.9	55.5	53.0	56.2	40.2	40.0	36.4	35.2	35.6	35.5	39.0	37.3
Total disagree	17.8	14.9	16.6	17.2	12.3	14.0	14.7	11.5	8.2	8.1	9.1	9.6
Net agree	34.0	40.6	36.4	39.0	27.9	26.0	21.7	23.7	27.4	27.4	29.9	27.7
8b) A rise in interest rates would make prices in the street rise slowly in the medium term - say a year or two
Agree strongly	17.7	18.4	17.3	17.7	10.9	13.1	9.1	10.5	6.4	7.7	8.8	8.5
Agree	29.0	32.9	30.6	35	28.3	26.1	26.2	23.1	27.9	27.9	27.8	26.9
Neither agree nor disagree	18.4	16.5	20.9	17.5	12.5	11.2	12.4	13.1	15.7	17.6	16.2	18
Disagree	14.8	13.0	12.5	13.5	10.3	9.8	10.0	8.9	7.0	5.8	6.6	8.4
Disagree strongly	6.07	5.2	6.1	4.7	3.71	3.67	4.6	3.9	2.6	2.6	3.3	3.1
Don't know	14.0	13.9	12.5	11.7	34.3	36.2	37.7	40.5	40.5	38.4	37.1	35.1
Total agree	46.7	51.3	47.9	52.7	39.2	39.2	35.3	33.6	34.3	35.6	36.7	35.4
Total disagree	20.9	18.2	18.6	18.2	14.0	13.5	14.6	12.8	9.6	8.4	9.9	11.5
Net agree	25.9	33.1	29.3	34.5	25.2	25.7	20.7	20.8	24.7	27.2	26.8	23.9
Q.9 If a choice had to be made, either to raise interest rates to try to keep inflation down; or keep interest rates down
and allow inflation to rise, which would you prefer?
Interest rates to rise	44.7	42.2	44.2	38.6	27.2	26.3	23.9	21.5	20.8	23.7	22.5	19
Interest rates to fall	18.6	17.7	21.7	36.5	31.6	28.0	28.2	25.4	29.3	29.4	33.7	38.1
No idea	36.5	39.8	33.9	24.7	40.9	45.6	47.9	50.9	49.9	46.9	43.4	42.9
Q.10 Which group of people meets to set Nigeria's monetary policy rate?
Monetary Policy Committee	52.7	54.5	55.4	55.1	24.7	27.6	21.4	23.6	19.3	21.7	22.2	21.7
The Government	10.1	11.2	10.3	14.3	16.5	17.0	20.8	18.6	26.3	24.7	29.6	29.9
Federal Ministry of Finance	15.6	13.1	15.3	14.4	10.7	10.0	9.7	10.4	5.3	6.6	7.2	8.4
National Assembly	5.9	5.0	4.6	3.9	4.0	4.7	4.3	4.2	2.1	1.9	2.1	3.3
Others	2.8	1.8	1.8	2.1	2.2	2.3	2.5	1.9	1.2	1.0	0.7	0.9
Don't know	13.0	14.4	12.6	10.3	41.9	38.3	41.3	41.2	45.8	44.1	38.2	35.8

Q.11 Which of these groups do you think influences the direction of the interest rates?

Government ministers	6.4	8.7	7.8	6.5	9.3	8.7	10.6	10.4	10.6	10.0	9.6	8.6
Civil servants	7.2	5.6	6.6	5.1	5.2	4.3	4.9	3.8	3.0	3.5	3.9	4.1
CBN	73.8	72.1	73.2	70.0	38.2	40.6	35.0	33.3	31.7	35.7	37.2	39.9
Banks	3.2	3.7	4.0	10.8	9.8	10.8	10.9	10.9	13.3	9.7	13.8	13.1
No idea	9.4	9.9	8.3	7.6	37.3	35.4	38.3	38.9	41.4	41.2	35.4	34.3

Q.12 Which of the following best describes the independence of the Monetary Policy Committee?

Influenced by the Government	20.6	22.1	23.6	27.4	18.8	20.6	20.7	21.7	25.6	25.0	27.5	27.8
Influenced by the Federal Ministry of Finance	29.5	30.7	29.6	24.4	13.7	12.6	14.2	13.6	8.9	8.7	10.1	10.4
Influenced by the National Assembly	26.2	26.4	26.3	8.5	5.4	8.1	5.1	6.5	4.1	5.4	5.8	6.6
Not influenced by any arm of Government	8.7	7.0	8.6	23.4	14.2	10.7	9.5	9.4	7.5	9.9	11.0	14.6
No idea	15.0	13.7	11.7	16.2	47.7	47.4	49.7	48.4	54.0	50.9	45.5	40.6
Q.13 Overall, how satisfied or dissatisfied are you with the way the Central Bank of Nigeria
Very satisfied	18.6	23.3	25.6	10.1	6.0	6.6	8.2	11.4	4.3	3.6	6.5	4.0
Fairly satisfied	30.1	40.9	35.7	35.6	22.8	21.0	20.3	17.6	20.6	22.1	18.9	21.9
Neither satisfied nor dissatisfied	17.9	14.4	19.6	18.5	12.8	11.1	10.3	9.8	16.6	17.0	18.9	18.1
Fairly dissatisfied	0.0	0.0	0.0	11.4	8.1	7.3	9.0	8.5	6.2	7.0	8.0	10.8
Very dissatisfied	15.9	10.3	10.4	15.7	14.4	17.6	12.9	14.6	11.7	11.7	12.3	12.6
No idea	11.4	11.1	8.6	8.7	35.8	36.4	39.3	38.1	40.6	38.7	35.4	32.6
Total satisfied	48.7	64.2	61.3	45.7	28.8	27.6	28.5	29.0	24.9	25.7	25.4	25.9
Total dissatisfied	15.9	10.3	10.4	27.1	22.5	24.9	21.9	23.1	17.9	18.7	20.3	23.4
Net satisfied	32.7	53.9	50.9	18.6	6.3	2.7	6.6	5.9	7.0	7.0	5.1	2.5

8