Analysts project higher inflation

Financial analysts have said that they expect Nigeria’s inflation rate to remain stubborn as the naira continues to struggle against other major currencies.

In different investment notes on Friday, analysts noted that inflationary pressures were easing globally, but remaining high in Africa’s largest economy.

 An analyst at the FXTM, Lukman Otunuga, stated that the current annual inflation rate for Nigeria stood at its highest since September 2005.

According to the National Bureau of Statistics, the inflation figure as of June was 22.79 per cent.

Otunuga said, “With the inflation beast drawing strength from rising food prices, transportation, and import costs, it is forecast to tick even higher for July. Ultimately, persistent signs of rising inflation may force the Central Bank of Nigeria to act once again at its next policy meeting in September.

“It is worth keeping in mind that the CBN has recently lifted its benchmark rates by 25bp to 18.75 per cent – its fourth consecutive rate hike in 2023. While higher rates have the potential to cap and control inflation, it could come at the cost of economic growth, which expanded by 2.31 per cent during the first quarter of 2023.”

In its Economic Bulletin for August, Financial Derivatives Company projected that the country’s inflation would go as high as 23.35 per cent.

The report said, “We are projecting a further increase in headline inflation to 23.35 per cent from 22.79 per cent in June. This would mark the seventh consecutive monthly increase and the highest inflation rate in 18 years. Apart from the sustained uptick in the general price level, the slope of the inflation curve is becoming steeper (i.e. the rate of change in inflation is increasing). This is an indication that the impact of recent policy changes is becoming more evident.

“In a period of one month, the price of PMS has increased twice, first to N488/ltr and then to N617/ltr. Diesel price is also up 5.88 per cent to N720/ltr from N680/ltr, pushing up transport and logistics costs.”

Speaking on the currency market, Otunuga said, “Should the current themes negatively impacting the naira remain present, prices may hit N1,000 in a matter of time. Such a development that will most likely increase the cost of living and squeeze households further in the short to medium term.”