Nigeria’s headline inflation rate is projected to increase by 0.56 percent to 23.35 percent in July 2023 from 22.79 percent in the previous month, analysts at Financial Derivatives Company Limited, led by economist Bismarck Rewane have said.
In the latest economic bulletin on Tuesday, the company said the inflation rate would mark the seventh consecutive monthly increase and the highest inflation rate in 18 years.
“Apart from the sustained uptick in the general price level, the slope of the inflation curve is becoming steeper (i.e. the rate of change in inflation is increasing). This is an indication that the impact of recent policy changes is becoming more evident,” it said.
It added that food inflation is estimated to rise by 0.33 percent to 25.58 percent while core inflation is projected to increase by 0.22 percent to 20.49 percent.
“This indicates that inflation in Nigeria is not only transient but is structural. It will therefore take time before it will begin moderating sustainably.”
President Bola Tinubu, in May, announced the removal of the petrol subsidy upon his inauguration into office. Barely three hours after the speech, petrol prices across the country surged by an average of 174.6 percent to N526.7 per litre.
The following month, the Central Bank of Nigeria abolished segments of the official foreign exchange market to the Investors & Exporters Window, where the “willing buyer and willing seller” was re-introduced. Based on this adjustment, the official rate rose from N463.38/$ to N756.94 /$ as at Wednesday.
In July, Nigerians saw the second hike in petrol prices as the Nigerian National Petroleum Company Limited increased the pump price at its stations in Abuja to N617 and other marketers across the country also adjusted their prices.
“In a period of one month, the price of Petrol MS has increased twice, first to N488/ltr and then to N617/ltr. Diesel price is also up 5.88 percent to N720/ltr from N680/ltr, pushing up transport and logistics costs. In addition, the naira touched an all-time low of N893/$ at the parallel market,” the FDC report said.
It added that food prices are typically affected by seasonality, rising during the planting season and reducing during harvest due to increased supply.
According to the report, the surge in logistics costs, naira depreciation, and the customs duty exchange rate adjustment could keep commodity prices elevated despite the commencement of the harvest season.
“Also, the closure of some of the land borders and India’s ban on rice exports would reduce supply and further stoke pricing pressures.”