Nigeria’s Inflation to Hit 34.65% in April –Firm

Nigeria’s inflation has been estimated to rise, albeit, slowly, in April amidst significant recovery recorded by the local currency, the naira. Inflation climbed 1.50% in a month to settle at 33.20% in March, a level seen three decades ago as market price of food items remain elevated.

Looking ahead, Cowry Research said it sees further but slower rise in headline inflation to 34.65% in April as the recent appreciation of the Naira begins to permeate the economy, causing ease on commodity price levels.

The investment firm noted that despite the overall upward trend, there’s a slight easing on a monthly basis, to 3% in March from 3.1% in February. The note stated that this marginal decrease might not be enough to offset the broader inflationary pressures Nigeria is experiencing.

“We think inflationary pressure will continue to stay elevated in the near term as Nigeria continues to experience surges in food prices resulting from supply chain disruption, the pass-through effect of the currencydevaluation,n and insecurity concerns which continues to mount further pressure on the food index”, Cowry Asset Management Limited Research unit stated in the update.

The latest consumer price inflation reading for the month of March 2024 shows that Nigeria’s headline inflation has risen for fifteen consecutive months, with the rate climbing year on year to 33.20%, up from 31.70% in February 2024.

This translates to a 1.50 percentage point increase month-over-month, with growth momentum moderating when compared to February and marks the highest level in over 28 years since this figure was achieved.

This surge in inflationary pressures was attributed to several factors such as heightened import costs, the pass-through effect of economic policies, sharp depreciation of the local currency, and the removal of fuel subsidies have all played significant roles.

Additionally, various items within the inflation basket, including food, housing, transportation, and other miscellaneous categories, have contributed further to the inflationary pressures, analysts said.

Cowry Asset said regardless, Nigeria faces significant challenges in curbing inflation, stemming from security issues in food-growing regions, the pass-through effect of currency depreciation on consumer prices, infrastructure deficits, elevated energy prices, and logistics challenges across the country.

The firm said of particular concern is food inflation, a crucial component of Nigeria’s inflation basket, has spiked to 40% in March the highest level since August 2005.

The food component risen steadily since January 2023 and remains the main contributor to the elevated headline reading. However, its pace of increase slowed compared with an acceleration of 254 basis points to 37.92% year on year in the previous month.

Analysts said imported food index continues to exert upward pressure on Nigeria’s headline inflation, with the latest reading showing an increase of 309 basis points to 32.89% year-on-year in March.

Notably, this increase is more pronounced in the prices of essential food items such as bread, cereals, potatoes, yams, fishes, oils, fats, meats, fruits, and beverages like coffee, tea, and cocoa, as items making up the divisional level.

On a positive note, the month on month reading for the food inflation decelerated slightly to 3.62% from 3.79% indicating that previous rate adjustments by the monetary authority are starting to impact the economy positively, the investment firm stated.

National Bureau of Statistics report showed that the deceleration in the monthly inflation reading comes on the back of a fall in the rate of increase in the average prices of the food items under the divisional level.

However, the annual core inflation rate, which excludes volatile items like farm produce and energy, has also risen substantially to 25.9%, reaching a multi-year high in March from 25.12% from the previous month.

The Bureau reported that the rise in core inflation was due to increased prices for items such as passenger transport by road, housing rentals, pharmaceutical products, and medical services. Meanwhile, on a month on month basis, the core reading increased by 37 basis points to 2.54% month on month in March.