Analysts at Financial Derivatives Company (FDC) Limited have projected Nigeria’s headline inflation rate to increase marginally by 0.38 percent in September to 20.9 percent from 20.52 percent in the previous month.
According to the analysts, they arrived at the projection based on a survey of major markets across Lagos Metropolis and their time series model.
“Even though the CPI is projected to rise, it is noteworthy that the pace of price increase is slowing. This suggests that price inflation may be approaching a point of inflexion,” they said.
They also said that the major causative factors propping up the price level remain the “usual suspects” such as a weaker domestic currency (N732/$), higher logistics costs and excess liquidity.
BusinessDay analysis shows that the projected inflation rate will be the highest since October 2005.
For the inflation sub-indices, FDC projects there will be an increase in both the annual food basket at 23.90 percent and core at 17.78 percent.
“However, the more current indicators of the monthly inflation which measures the change in prices between the current and previous month is showing a sign of price deceleration.”
Consumers would have to incur more cost or spend more to acquire basic food and services, Damilola Adewale, a Lagos-based economic analyst. “This implies a further weakening of their real income or wallet.”
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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.
Apart from the causes of inflation mentioned above, worsening insecurity, the impact of the Russia-Ukraine war, and weaker domestic currency, the current flooding and its impact on farmland may lead to higher prices in the fourth quarter of this year.
In recent weeks, heavy rains and flash floods have destroyed thousands of farmland in key agricultural-producing states.
“Nigeria’s food system is completely in disarray. The ongoing flooding has added to the problems of the food system, thus reducing food availability,” Kabiru Ibrahim, national president of the All Farmers Association of Nigeria, told BusinessDay.
“Hunger is going to further rise as we currently do not have anything in our reserves that would have served as a buffer to cushion the effect that would come from the shortfall,” Ibrahim said. In order to curb rising food prices, a recent report titled ‘How Africa can escape chronic food insecurity 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.
