Some market watchers have said that factors such as the depreciation of the naira and the fuel prices will likely see inflationary trends re-emerge.
These projections came ahead of the release of the inflation figure for September by the National Bureau of Statistics.
Nigeria’s inflation figure stood at 32.15 per cent in August, a consecutive month of decline from 33.40 per cent in July.
Analysts at Meristem Research in their Macroeconomic Update projected that September’s headline inflation would rise slightly to 32.21 per cent with food inflation expected to decrease to 37.26 per cent and core inflation moving upward to 27.94 per cent compared to 27.58 per cent in August.
Providing a premise for their projections, the experts said that while there might be a moderate decline in food inflation for September, supported by
an improved supply of key staples as the harvest season progresses, “The pass-through effect of increased fuel prices on transportation costs, potentially driving up food prices, as fuel costs saw a sharp increase during the month.
“For core inflation, we anticipate an upward trend, primarily driven by a 42.68 per cent surge in petroleum prices due to fuel scarcity, which significantly raised transport costs. Additionally, the slight depreciation of the Naira (4.31 per cent) in
September further supports this outlook. Ultimately, we project a moderate uptick in the country’s headline inflation for the month, influenced by these combined factors.”
The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, during the firm’s recent Third Quarter Webinar Series, expressed concerns that there may be a re-emergence of the inflationary trend due to rising fuel prices, which impacts the services of goods and services.
He said, “Although Nigeria’s inflation rate declined to 32.15 per cent in August 2024, largely due to improved agricultural yields during the harvest season, there are concerns that inflationary pressures may re-emerge. This decline reflects a notable impact on the food index; however, as we approach Q4 2024, rising fuel prices—exceeding N1,000 per litre—are expected to drive up the prices of goods and services, potentially reversing recent gains.”
Chukwu added that the effectiveness of the CBN’s tight monetary policy in curbing inflation remains uncertain, particularly in light of structural challenges such as inadequate infrastructure, high fuel costs, unreliable power supply, and logistical bottlenecks.
“These persistent issues hinder the overall effectiveness of policy measures aimed at stabilising prices,” he maintained.
The Olayemi Cardoso-led Central Bank of Nigeria since February 2024has adopted a rigorous monetary tightening approach aimed at controlling inflation, leading to hikes in the MPR, the Cash Reserve Ratio for both Deposit Money Banks and Merchant Banks and higher yields on fixed-income securities.
This aggressive stance appears to have positively impacted investment inflows into Nigeria, as higher interest rates typically attract foreign capital seeking better returns. This was indicated in the latest Capital Importation Report released by the NBS.
The benchmark rate currently stands at 27.25 per cent at the end of the September MPC meeting.
