Dipo Olowookere
By Dipo Olowookere
Inflation in Nigeria for August 2023 should reach 25.37 per cent compared with the 24.08 per cent recorded in July 2023, analysts at Meristem Securities Limited have predicted.
In a research note obtained by Business Post, the investment firm said this 1.29 per cent surge in the average cost of goods and services would be influenced by the rise in the prices of food, premium motor spirit (PMS), “the lingering challenges in sourcing foreign exchange (FX) and depreciating exchange rate.”
Nigeria has faced a food crisis for some months due to the invasion of Ukraine by Russia in February 2022.
Despite being a major oil-producing country in Africa, the country, which prides itself as the largest economy on the continent, has struggled to improve its forex earnings despite the prices of crude oil rising.
In May 2023, President Bola Tinubu announced the removal of fuel subsidy, shooting the price of petrol in the country higher. This caused prices of goods and services to go red hot and have refused to cool down.
The liberalisation of the forex market has also not helped matters, and the gap between the official exchange rate and the others has continued to widen.
In the note released ahead of the disclosure of the inflation numbers for last month on Friday, September 15, by the National Bureau of Statistics (NBS), Meristem said the headline inflation is expected “to increase by 129 basis points to 25.37 per cent (on a year-on-year basis) versus 24.08 per cent in July 2023.”
It noted that despite the Food and Agricultural Organization (FAO) revealing that last month, the global food commodity price index fell by -2.11 per cent, it was not the same in Nigeria, as key food prices remained elevated in the period under review “based on our perception of market prices.”
“We anticipate a continued surge in the price of rice and oils, hinged on the partial ban on rice exports in India, which has had a substantial impact on global rice supply.
“We also expect that higher logistic costs and poor road networks in the country would further impact food prices.
“Thus, we expect food inflation to shoot up by 173bps to 28.71 per cent for August 2023,” a part of the note stated.
The firm further said the FX crisis and high energy costs would “drive up the prices of import dependent items like petroleum products, motor vehicles, clothing and fabrics etc., that typically impact the core index movement.”
