Ahead of the release of the August inflation report by the National Bureau of Statistics (NBS), analysts have predicted that Nigeria’s headline inflation rate will surge above 20 percent.
“Based on our Lagos market survey and econometric model, there is an indication that headline inflation will increase by 0.76 percent to 20.4 percent,” analysts at Financial Derivatives Company Limited (FDC) said in their latest economic bulletin.
They said this price growth would be the seventh month-on-month consecutive increase this year.
FDC said the projected increase in Nigeria’s inflation rate from 19.60 in July to 20.4 percent in August was fuelled by several factors but significantly by exchange rate pressure and price of diesel.
Cordros Capital, a financial services firm, also predicted that the headline inflation would be 20.52 percent in August.
“We expect the headline inflation to settle at 1.76 percent month-on-month in August, translating to an 87bps increase in the year-on-year inflation rate to 20.52 percent,” the company said in a recent weekly economic and market report.
Cordros Capital said its predictions were hinged on the lingering rise in transport costs, high gas and diesel prices, persistent currency pressures and the unfavourable base effects from the last year’s corresponding period.
United Capital, a financial and investment group, had also predicted last month that the headline inflation would hit 20.5 percent.
“Looking ahead, we remain downbeat about the inflation outlook for Nigeria. We expect food price pressures, elevated energy costs, and a relatively low base for inflation in the prior year will keep the inflation rate elevated. We project the inflation rate will rise to 20.5 percent in August 2022,” the company said.
The price of diesel has soared by almost 178 percent year to date to N800 per litre from N288 in January.
The country’s foreign exchange challenges have worsened. On September 6, 2022, at the official market, the naira-dollar exchange rate closed at N435/$1, up from N327/$1 in March 2020.
At the parallel market, it closed at N702/$1, up from N368/$1 in March 2020.
According to the FDC report, the decrease in global food price has not reflected in Nigeria and sub-Saharan Africa due to weaker local currencies, and the decrease in global food prices is as a result of the Russia-Ukraine grain exports agreement.
Food inflation in Nigeria accelerated to a 14-month high of 22.02 percent in July, according to NBS.
The FDC said the naira had depreciated by over 20 percent year-to-date to 705 per dollar and that though global food commodities had dropped by 1.92 percent in August, domestic food inflation still remained above 20 percent in July.
FDC said that in spite of a rise in inflation, the Monetary Policy Committee was not likely to increase rates at their next meeting this month.