Nigeria’s inflation rate to hit 21.3% in October – Rewane’s FDC

Nigeria’s headline inflation rate is projected to increase for the ninth consecutive month by 0.55 percent to 21.32 percent in October 2022 from 20.77 percent in September, analysts at Financial Derivatives Company (FDC) Limited say.

In a new economic report, the FDC analysts, led by economist Bismarck Rewane, said food inflation would also rise by 0.62 percent to 23.95 percent, while core inflation would increase by 0.18 percent to 20.5 percent.

“Typically, headline inflation and food inflation taper from September to November every year, reflecting the core harvests that occur in the period,” the report stated.

However, it added that the recent floods in the major food-producing states will rob the country of the price moderation effects of the harvest season.

“This coupled with higher logistics costs that have been exacerbated by the resurfaced fuel scarcity in the major cities will keep food inflation elevated in the coming months.

“Food inflation has maintained an upward trend since January. It has increased by 6.21 percent in the last 10 months,” the report said.

The floods in Africa’s biggest economy has been majorly attributed to the release of water from the Cameroonian Lagdo dam, which affected Nigeria because of its lack of flood defense mechanism, such as the Dasin Hausa Dam which should have been built 40 years ago and would have been able to cushion the effect of whatever came from Lagdo.

Data from UN OCHA, World Food Programme, and Telimer Research shows that the country currently has the largest number of people (3,480) hit by flooding among 19 African countries.

This situation has prompted Sadiya Umar Farouq, Nigeria’s minister of humanitarian affairs to ask the five state governments badly affected by the flood to prepare to evacuate residents living along flood plains.

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“Despite all our efforts of averting the consequence of the 2022 flooding season, unfortunately we have recorded the loss of over 500 lives, partial or total damage of more than 90,000 houses, damage of more than 140,000 hectares of farmland so many roads and other critical infrastructures were also affected,’’ she said.

While still wallowing in the effects of the Ukraine-Russia war, hangovers from the coronavirus pandemic and constraints imposed by insecurity and poor macro-economic policies, new problems have emerged, and old ones have cycled back, according to a recent Jollof Index report by SBM Intelligence.

“More recently, floods in many parts of the country are setting up a heightened food insecurity problem, and the effect of this will be felt in the coming quarters,” the report warned.

The high inflationary pressures in the country have caused over 105 million Nigerians to still live in extreme poverty, according to data from the World Poverty Clock of the Brookings Institute.

And the World Bank estimates that the inflation is likely to push an additional one million Nigerians into poverty by the end of 2022, on top of the six million Nigerians that were already predicted to fall into poverty this year.

In order to curb rising food prices, a recent report titled ‘How Africa Can Escape Chronic Food Insecurity Amid Climate Change’ by the International Monetary Fund (IMF) recommends climate-resilient infrastructure as a way to protect food production and distribution from weather events.

Some of the frameworks considered by the International Organisation include solar power, for example, which it said will facilitate irrigation, water access, and temperature control for food storage. “Equally impactful is a flood barrier that protects ports and roads critical to food distribution,” the report stated.

“Digitalisation is also crucial as it gives farmers access to early warning systems and mobile banking as well as platforms to purchase fertilisers, seeds, or sell produce, connecting small producers to large vendors,” it added.

The IMF report also identified that social cash transfers/assistance that is targeted and far-reaching can help people buy food and rebuild after weather shocks, making families and small businesses able to invest in resilience-building equipment and technology.

It also said access to larger markets can incentivise investment in agricultural production networks and value chains, facilitate knowledge spread such as how to plant drought-resistant crops and spur competition.

“One positive step in this direction is the Africa Continental Free Trade Agreement among 54 countries, which covers most goods and services,” it said.