Nigeria’s inflation rate is expected to accelerate in the coming months on the back of the surge in energy prices, following the latest sanctions placed on Russian oil by the United States, analysts have said.
The analysts’ comments come ahead of the release of February inflation numbers by the National Bureau of Statistics which is slated for Tuesday.
Since the second quarter of 2021, Nigeria has been battling a high double-digit inflation rate as a result of the COVID-19 pandemic. The inflation rate dropped from 18.17 percent in March 2021 to 15.60 percent in January this year.
Data from the Observatory of Economic Complexity revealed that the most common import partners for Nigeria include the United States, Belgium, China and India.
Emeka Ucheaga, chief executive officer of EU Intelligence, said Nigeria should expect to import inflation from its import partners as the rate of inflation in these economies had been escalating as a result of the Russia-Ukraine crisis.
He said, “The sanctions placed on Russian oil as a result of this ongoing war is going to eventually have global impacts but Nigeria would begin witnessing it as a result of its import partners.
“The United States inflation rate increased 7.5 percent, Belgium increased 8.04 percent while India increased 6.01 percent. Nigeria, being an import partner with these countries, is definitely going to witness an uptick in its inflation rate as these economies would definitely export part of their inflation during transactions with us.
“With oil prices currently at $117, inflation in these economies would definitely witness significant increases.”
The prices of Automotive Gas Oil (AGO), otherwise known as diesel, and Jet A-1 (otherwise called aviation fuel), as well as the landing cost of Premium Motor Spirit (PMS), have surged in recent weeks.
The pump price of diesel was between N550.0 and N625.0/litre as of March 8, while aviation fuel (JetA1) was sold for between N579.0 and N607.0/litre.
The increase in petroleum products prices has led to adjustments in transport fares.
Ayodeji Ebo, head, of retail investment at Chapel Hill Denham, said the inflationary impact of the Russia-Ukraine war on Nigeria would be felt most by the average man.
He said, “Where I see inflationary pressures emanating from is from the cost of energy. The cost of energy and gas have doubled as a result of their deregulation and that would impact the cost of production, which would subsequently cut across other sectors gradually.
“With the prices of diesel and petrol rising, transportation cost would also contribute immensely to an uptick in inflationary pressures in the coming months.
“With diesel almost tripling its original price, we could most likely see inflationary pressures emanating from the transport sector all through this first quarter into the second quarter.
“Data from the next transport fare watch report is most likely going to paint a grimmer picture of increased transport costs exacerbated by the current fuel scarcity.”
Ebo said the country should expect to see commodity prices increasing in the near term due to the conflict between Russia and Ukraine.
“Prices of wheat have witnessed all-time highs recently; so, prices of wheat-related confectionaries should be expected to rise significantly and these would also contribute to the rise in inflationary pressures,” he added.