Nigeria’s Inflation Rate To Hit 32.77% Amid Rising Food Prices

Nigeria’s inflation rate is anticipated to surge to 32.77 percent this month, driven by escalating food prices and harvest depletion, according to projections from Cordros Capital Research.

The firm predicts a 3.29 percent month-on-month increase in food inflation, underscoring the persistent price pressures within the nation’s food sector.

In February, the country experienced a significant inflation rise, with the headline rate climbing by 1.80 percentage points to 31.7 percent year-on-year, up from 29.9 percent in January.

This spike in inflation has been attributed to a combination of factors including reduced food supply, ongoing currency devaluation, and soaring energy costs, further exacerbated by unfavorable base effects from the previous year.

The rising consumer prices, particularly in the food basket, highlight the challenges of balancing supply and demand within the market.

As the agricultural sector struggles to meet the growing needs of the population, price pressures continue to mount, affecting the overall cost of living for Nigerians.

The ongoing inflationary trend poses significant concerns for economic stability and household welfare in Nigeria, prompting calls for strategic interventions to curb the rising costs and alleviate the financial burden on citizens.

The government and relevant stakeholders are under pressure to implement effective measures that will ensure a steady supply of food and other essential commodities, stabilize the currency, and manage energy pricing to mitigate the inflationary pressures facing the nation.

They said, “We highlight broad-based pressures across the food and core baskets. Precisely, food inflation (+251bps to 37.92 per cent y/y) remained at a 19-year high, while the core inflation (+154bps to 25.13 per cent y/y) settled at the highest level since March 2004 (32.6 per cent). On a month-on-month basis, consumer prices surged by 48bps to 3.12 per cent (January: +2.64 per cent m/m), the highest point in six months.

“On our outlook, we identify the CBN’s efforts to stabilize the naira, recognizing the high pass-through effect on domestic prices. These efforts include improved dollar supply from the CBN to the forex market, monetary tightening, and higher domestic interest rates.”

Based on the aforementioned, the experts predicted a less volatile naira this month, compared to previous months, thus moderating the impact of currency volatility on price increases in March.

Consequently, the analysts forecasted core inflation to print lower by 10bps to 1.98.per cent MoM in March.

However, they expected harvest depletion to sustain price pressures within the food basket, leading to a MoM increase of 3.29 per cent for food inflation.

“Broadly, we forecast headline inflation to print at 2.69 per cent MoM, resulting in a YoY increase of 107bps to 32.77 per cent.

“The recently released data by the National Bureau of Statistics (NBS), which indicated that collections from the Company’s Income Tax (CIT) increased by 49.9 per cent YoY to N1.13 trillion in Q4, 2023 (Q4, 2022 N753.88 billion), bringing the total CIT collection to N4.90 trillion in 2023 full year (FY) (2022FY, N2.83 trillion), the experts noted that the increase was due to broad-based growth across foreign CIT payments (+49.0 YoY to N596.1 billion) and local collections (+50.9 per cent YoY to N533.93 billion), in addition to currency depreciation which also supported the substantial increase in foreign collections.”

However, the expert noted that the CIT collection declined by 35.4 per cent on a quarter-on-quarter basis in Q4, 23 (against Q3, 2023: +13 per cent q/q to N1.75 trillion) due to the impact of the weak macro economy on corporate earnings.

They added, “Looking ahead, we expect CIT collections to increase in the near term in line with the tax provisions of the 2023 Finance Act and Fiscal Policy measures.