Nigeria’s headline inflation rate is projected to rise for the 10th straight month to 27.8 percent in October 2023 from 26.72 percent in September, according to analysts at Financial Derivatives Company Limited (FDC), led by economist Bismarck Rewane.
This comes before the release of the country’s inflation report for October which is expected to be released on November 15, 2023 by the National Bureau of Statistics.
“Our Lagos market survey and time series model is projecting that headline inflation would spike by 1.08 percent to 27.8 percent for the month of October,” FDC said it latest economic bulletin on Monday.
It said if their estimate is accurate, this will be the 10th consecutive monthly increase this year, making it the highest level of inflation in 18 years (a record level),” it said.
It added that the food basket is expected to increase by 1.21 percent to 31.85 percent and that the principal commodities pushing the food index are flour, semovita, sugar, and noodles.
“In the last decade, the trend is for food price deceleration in October through December (Q4), which is typically the harvest season.”
FDC noted that this year, the country have witnessed an aberrational movement in food prices due to the cross elasticity of demand impact of imported foods on locally produced commodities like yams, garri, beans, and cassava.
“An example of this phenomenon is the relationship between the price of wheat flour and yams. The price of flour has spiked by 46.88% to N47,000 per 50kg bag. At this time in 2022, the price of flour was N32,000. The knock-on effect on yam is evident in its price, which has increased by 16.7% to N3,500 per tuber, “ it said.
“In the meantime, we expect both core, food, and headline inflation to continue their rising trend even though at a slower pace in November/December. This is because the pace of Naira depreciation has slowed with a trading range of N1,150 – N1,200/$,” it added.
The company also said that the Central Bank of Nigeria has recently allowed the stop rate on OMO bills to rise by 349 bps to 17.98 percent per annum.
“This is expected to increase the level of national savings (marginal propensity to save) and thus help taper the rate of inflation in the medium term.”