Against the backdrop of renewed pressure on the cost of doing business in Nigeria, it has been estimated that headline inflation will cross 35 per cent by the end of the year, completely rubbishing the Federal Government’s 21 per cent target for the year.
The National Bureau of Statistics, NBS, during the weekend, said headline inflation rose to 33.88 per cent in September 2024, with both core inflation and food inflation driving the inflationary pressures.
The September figure represents a dashing of hope for moderation kindled by July and August figures which showed some declines.
But economy analysts have said that a fresh round of price increases is now wiping off chances of stability and recovery as November headline inflation is projected to reach 34.58 per cent before shooting above 35 per cent in December.
The analysts have attributed the renewed increases in the cost of goods and services to key traditional inflation drivers such as fuel price and the exchange rate which, they noted, have been rising since this month, hinting that it will worsen due to seasonal pressures from yuletide.
The exchange rate has risen to a monthly average of N1,740/ $1 in November from N1,660/$1 last month, while fuel price has also crossed N1000/litre from about N850/litre a month ago.
The economists also said the impact of flooding on food inflation is still much with the economy.
Moreover, they predicted that in line with its inflation targeting policy, the Central Bank of Nigeria, CBN, would raise its monetary policy rate, MPR, this month, a development which will further spark off a fresh round of interest rate increases in the financial sector, and which will, in turn, increase the cost of doing business.
Why inflation is rising —CardinalStone
Reflecting on these scenarios, economists at CardinalStone Finance and Investment Limited, a Lagos based investment bank, stated: “Inflation will likely rise in November as festive-induced demand, insecurity, and the lag impact of flooding are expected to pressure food prices. “Similarly, core inflation may sustain an upward trajectory on the back of elevated energy prices. Hence, we expect headline inflation to settle at 34.58% in November 2024 before closing the year at 35.10%. “Elsewhere, in light of rising inflation, we expect the CBN to increase the benchmark rate by 50bps in its November meeting”.
Also speaking on the inflation outlook for the rest of the year, analysts at Meristem Securities Limited, another Lagos based investment house, said, “Looking forward, inflationary pressures are likely to remain high in the short term, fuelled by lower food supply, festive season demand, increased transport expenses, and elevated fuel prices”.
Reflecting on the current upsurge in inflationary pressures, the economists at Cardinalstone Finance had stated: ‘‘Headline inflation continued its upward momentum in October, rising by 1.18 percentage points (ppts) to 33.88% year-on-year (YoY), exceeding Bloomberg analysts’ average estimate by 57 bases points (bps) and our projection by 39bps. From a month ago, inflation edged up by 12bps to 2.64% as against 2.52% in September, largely driven by increased food and energy prices.
“Despite the harvest season, food inflation increased by 1.39ppts to 39.16% YoY, as conflict in food-producing regions and reported cases of flooding in states like Borno and Kogi pressured food output. Meanwhile, core inflation also rose, climbing by 0.94ppts to 28.37% YoY due to elevated energy costs”.
Also in their review of the current inflationary trend, the analysts at Meristem Securities had stated: “The National Bureau of Statistics reported that Nigeria’s headline inflation rose for the second consecutive month in October 2024, reaching 33.88%, up from 32.70% in September, marking a 118 basis point increase.
“This rise is largely due to significant increases in food and core inflation, which hit 39.20% and 28.40%, respectively, compared to 31.52% and 22.58% in October 2023.
“The spike in food inflation reflects ongoing impacts from previous floods that disrupted harvests, coupled with insecurity and high transportation costs, while the core index rose mainly due to higher fuel prices affecting transport costs”.
But contrary to this position, Nigeria’s inflation which had slowed down in July and August returned to an uptrend in September 2024 with a further rise in October while analysts predict that November and December would sustain the uptrend, a situation that would make Nigeria an exception in the IMF’s sub-Sahara Africa position.(Vanguard)
