Nigeria’s inflation rate recorded another rise at close of Q1 March 2024, rising from 31.70 per cent to 32.20 percent.
This based on statistics of inflation rate for last month, billed for release on Monday by National Bureau of Statistics (NBS), which states that it is estimated to rise by some 40 to 50 basis points.
It increased 180 basis points in January and 98 basis points in February.
Ahead of the release by the NBS, independent consumer surveys and econometric models showed that inflation remained on the rise, although the momentum of price increases has slowed down.
Specifically, NBS indicates that inflation may rise from 31.70 per cent in February to 32.20 per cent in March, rising by 180 basis points from 29.90 per cent in January to 31.70 per cent in February.
Food inflation heightened by 251 basis points to 37.92 per cent while core inflation rose by 154 basis points to 25.13 per cent.
Inflation also rose by 98 basis points from 28.92 per cent in December last year to 29.90 per cent in January 2024.
Meanwhile, a survey by Financial Derivatives Company (FDC) indicated “significant declines in prices of various food commodities, especially imported commodities, while stability was observed in others.”
The FDC estimated that inflation rate will rise slightly to 32.15 per cent in March, an increase of 45 basis points. Based on its independent survey, it projected that food inflation will rise marginally to 38.33 per cent in March from 37.92 per cent in February while core inflation is expected to increase to 25.27 per cent from 25.13 per cent. Inflation records marginal rise at close of Q1
On a month-on-month basis, both food and core inflation are expected to decline, according to FDC survey.
Noting general decrease in prices, the FDC attributed the marginal increase in inflation rate “partly to the confluence of festivities Easter and Ramadan, which increased consumer demand and changed spending patterns. In addition, seasonality increased supply shortages resulting from planting season”.
FDC’s Managing Director Bismarck Rewane said the Central Bank of Nigeria (CBN)’s tightening stance has seen a slowing of the rate increase in inflation.
According to him, the trajectory of price increases both annual and monthly will seem to suggest that inflation is fast approaching a point of inflection.
He pointed out that most analysts were of the view that both core and food inflation will taper in the second half of 2024, citing the more bullish projection of inflation rate of 15.1 per cent next year by the Economic Intelligence Unit (EIU).
Rewane said: “Inflation expectations are that prices will rise in the near term before dipping in the second half. This will be after a sell-off of the existing expensive inventory of traders.
“However, the long-anticipated wage review is likely to reignite inflationary pressures, thus prolonging the current high inflation rate.”
He explained that the appreciation in naira value has positively impacted inflation trend. The naira closed weekend at N1, 125 per dollar at the parallel market as against N1, 250 per dollar at the beginning of this month.
Rewane said: “The good news is that the naira’s appreciation is beginning to reflect in the prices of some food items as businesses stock up on new inventory.
“Our survey revealed a 5.26 per cent decline in the price of a 50kg bag of rice to N90, 000. Sugar prices fell by 5.88 per cent to N80, 000 per bag, flour experienced a decline of 7.81 per cent to N59, 000 per bag, and a carton of noodles now costs N7, 800, down by 15.22 per cent. The sustained appreciation of the naira due to the CBN’s foreign exchange (forex) market sanitisation efforts will taper prices of imported commodities and slow the pace of inflation in the coming months.”
Analysts at FSDH Group said the fiscal authorities will also need to step up in addressing non-monetary drivers of inflation, in order to engender a stable and steady recovery.
They said: “The dry-season farming initiative is a good step in the right direction as it could increase the supply of agricultural products in the medium term. Infrastructure deficits, poor power supply and insecurity are critical issues for the fiscal authorities to address.
“The CBN will also need to temporarily halt Ways and Means – lending to the government. Raising rates and increasing lending to the government is counter-intuitive and the cost will be borne by businesses in the form of higher borrowing costs and inflation.
“Fiscal authorities need to raise finance from non-CBN sources. Aggressively reducing oil theft, exploring solid mineral exports and curbing illegal mining are some options.
“We believe that having a positive real interest rate – where interest rates are higher than the inflation rate – is ideal; and fiscal and monetary authorities must collaborate to address inflation, one of Nigeria’s biggest economic problems.”
In tackling inflation, Managing Director, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf advised the government to address security concerns causing disruption to agricultural activities as well as sustain reforms in the forex market to stabilise the exchange rate, reduce volatility and stimulate forex inflows.
According to him, government should implement incentives to increase forex liquidity and inflows of forex into the country.
Other policy measures necessary to curb inflation, according to Yusuf, included fixing of structural problems to boost productivity and competitiveness of domestic firms, addressing the challenge of high transportation and logistics cost, reducing fiscal deficit monetisation to minimise incidence of high-powered money in the economy and managing climate change consequences to reduce flooding and desertification.
He advised the government to ensure the restoration of normalcy and good order at the nation’s ports to reduce transaction costs, reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially in the light of depreciation in the exchange rate.
The government he said, should address concerns around high energy cost and create an investment friendly tax environment to boost investments and output in the economy.
- With additional reports from The Nation
