Nume Ekeghe
Following the perennial scarcity of Premium Motor Spirits (PMS), uncertainty of elections, elevated energy prices and other macroeconomic variables, experts in the financial service sector have predicted that elevated inflationary pressures will persist in the month of February.
In a report, experts at Cordros Securities Limited noted that Nigeria’s inflation could reach a record high of 22.11 per cent for the month of February even as the consumer price index (CPI) continues to rise.
According to the National Bureau of Statistics (NBS), headline inflation reverted to an upward trend, rising by 47 basis points (bps) to 21.82 per cent year-on-year ((YoY) in January (December 2022: 21.34per cent YoY) – the highest level since September 2005 (24.32 per cent YoY).
According to the experts, “The elevated price pressures were primarily driven by the chronic PMS scarcity and the associated higher fuel prices witnessed in the review period. Thus, food inflation expanded (+56bps to 24.32 per cent YoY) to the highest level since October 2005 (24.56 per cent YoY), while core inflation (+66 bps to 19.15 per cent YoY) rose to its highest point in 15 years. On a month-on-month basis, headline inflation increased by 15bps to 1.87 per cent (December: 1.71 per cent Month-on-Month MoM).
“Over the short term, we expect inflationary pressures to maintain an uptrend in line with the higher food demand-supply gap, lingering PMS scarcity and elevated energy prices, currency pressures, and election uncertainties. Accordingly, we forecast m/m headline inflation of 1.88 per cent in February, translating to 22.11 per cent YoY.”
Similarly, analysts at Afrinvest noted that with core inflation surging to 19.16 per cent YoY for January, shows an increase in the price level is broad-based, as virtually all items were severely impacted by the current domestically induced shock to business activity. “Sadly, an increase in the monetary policy rate cannot tame the current menace of price surge, as the major drivers are scarcity of cash, limited fuel supply, and the existential problem of heightened FX risk, just to mention a few.”“It is, therefore, very imperative for policies and actions to be targeted at these triggers to address the current soaring inflation rate. The current level of inflation is bad for economic growth, consumer and investor confidence, and exchange rate stability. If Nigeria’s inflation continues to trend higher while advanced economies are recording some relative deceleration of inflationary pressure, it could further worsen the dire condition of capital importation with its negative pass-through effect on the foreign reserves and the foreign exchange market,” they noted.
