Nigeria’s Inflation rate to trend higher, says analysts

Analysts at InvestmentOne Research, on Monday disclosed that Nigeria’s inflation rate is expected to trend higher as global energy prices remain elevated following decisions to maintain production cuts by Organization of the Petroleum Exporting Countries (OPEC)+ power houses.

National Bureau of Statistics (NBS), in its latest release of the Consumer Price Index (CPI) figures on inflation rate exhibited a persistent upward trajectory, with the most recent data for August showcasing a particularly significant surge.

The bureau in August disclosed that the headline inflation rate rose by 172basis points, reaching 25.80per cent, a substantial acceleration from July’s rate of 24.08per cent.

“On a month-on-month basis, the headline inflation increased by 29bps to 3.18per cent,” the report added.

The report by analysts at InvestmentOne Research stated that “In the month of August, a noteworthy surge was observed in the food index, characterized by a substantial increase of 236basis points.

“This upward movement propelled the food index to a notable 29.34per cent from 26.98 per cent in July. This surge in food inflation can be attributed to significant price hikes across various categories including Oil & fat, Bread & cereal, fish, potatoes, yams & other tubers, fruits, meat, vegetables, milk, cheese, and eggs.

“Meanwhile, the core inflation metric displayed a gradual upward trend, increasing by 68basis points to reach a year-on-year rate of 21.15per cent, up from July’s 20.47 per cent.  This uptick was primarily driven by notable price hikes in critical sectors, including Air and Road Passenger Transport, Medical Services, Vehicle Spare Parts, and Personal Transport Equipment Maintenance.”

According to analysts at InvestmentOne Research, taking a monthly standpoint into consideration, the data reveals notable fluctuations in inflation rates.

“Food and non-alcoholic beverages inflation experienced a month-on-month increase of 41basisi points, reaching 3.85per cent in August, compared to the previous month’s 3.44 per cent (July). In contrast, imported food inflation declined by 53bps, settling at 1.58 per cent in August, diverging from the 2.11 per cent recorded in July.

“A more granular analysis unveils that food inflation expanded by 41bps, reaching 3.87 per cent in August. This decline in imported food inflation may be linked to the month’s exchange rate dynamics, making foreign goods relatively more expensive. We posit that the persistent rise in food inflation is primarily associated with escalating transportation costs due to  the removal of petrol subsidies and the depreciation of the Naira.

“Additionally, ongoing security challenges in key food-producing regions and disruptions in the supply chain contribute significantly to the pronounced increase in food inflation. These insights underscore the multifaceted factors at play in the complex landscape of inflation dynamics.”