Analysts at Comercio Partners have predicted that food prices in Nigeria will surge during the festive period, further piling pressure on households that are reeling from the worst cost-of-living crisis in a decade.
This is as Africa’s most populous country has continued to see a steady rise in its food inflation to 39.16 percent in October, up from 37.77 percent in September.
“With the festive season approaching, food prices are expected to surge, putting additional strain on household budgets and likely leading to more restrained celebrations,” the report said.
Read also: Bloomberg report: Two-thirds of Nigerian families go hungry as food prices soar
It added that this projected rise in the coming month is fuelled by higher fuel prices that drive up transportation costs for goods. Exchange rate fluctuations further exacerbate this issue, particularly affecting the prices of imported food items.
“Despite the food waiver policy being implemented, the ongoing exchange rate volatility is likely to continue impacting food prices, presenting a challenging outlook for consumers and the economy as a whole,” the report said.
The report added that food inflation, a significant driver of overall inflation, drove Nigeria’s consumer price index to rise to 33.88 percent in October, higher than the previous month.
This is despite the Central Bank’s intervention to curb inflation by increasing the monetary policy rate.
Since the beginning of the year, the Apex Bank has adopted a hawkish stance, raising interest rates by 850 basis points to tackle inflation.
“Given the ongoing inflationary pressures and the likelihood of continued exchange rate instability, another rate hike of 50 basis points but retains CRR levels is anticipated at the CBN’s next meeting,” the analyst said.
However, analysts at Meristem Securities Limited in their Inflation Report released on Tuesday projected that the demand for foreign exchange during the festive season will worsen the depreciation of the naira.
There have been multiple projections about the naira in recent times with most of it projecting a further weakening before strength.
This month, the naira performed poorly in all market segments despite foreign reserves reaching their highest level in 32 months.
The local currency is expected to weaken to N1,993/$ by 2028 according to a recent analysis by BMI, a division of Fitch Solutions.
Read also: Plateau residents raise concerns over escalating food prices as yuletide approaches
At the close of trading on Tuesday, the dollar was quoted at N1,690.37, reflecting a loss of 2.26 percent compared to N1,652.25 quoted at the Nigerian Autonomous Foreign Exchange Market (NAFEM) the previous Friday, based on data from FMDQ Securities Exchange Limited.
However, the October Business Expectations Survey released by the CBN indicated that respondents expect the naira to depreciate in the current month, the next, and the next three months but appreciate in the next six months.
Against that projection, Bismarck Rewane, an economist has projected that the naira will strengthen in January 2025 compared to its current weak trading position.
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