Joseph Inokotong, Abuja
As the public awaits the release of February inflation data by the National Bureau of Statistics (NBS), the CAPE Economic Research and Consulting has projected headline inflation rate in Nigeria to rise to 22.05 percent in February 2023.
The forcast, which is contained in its March Economic Newsletter is predicated on the scarcity of the Naira occasioned by the Central Bank of Nigeria (CBN) currency redesign that CAPE said would further fan commodity prices.
“Inflation is expected to rise in February 2023 as currency redesign persists. Our forecast showed that the scarcity of the Naira would further fan commodity prices. Hence, the inflation pressure persists as the headline and food inflation are expected to rise to 22.05, 23 basis point increase, and 20.01, 86 basis point increase, respectively”, CAPE stated.
According to CAPE, the key drivers of the headline inflation forecast were, food prices, parallel market exchange rate, broad money supply, and narrow money supply which contribute 6.2 percent, 2.09 percent, 0.94 percent, and 0.55 percent, respectively, while food prices and parallel market exchange rate are push factors, narrow and broad money supply are pulled factors.
“Our analysis showed that the magnitude of the listed four main drivers of inflation, food prices, parallel market exchange rate, broad money, and narrow money supply, increased in February.
“For example, Food prices increased by 20 basis points from the January forecast while the parallel market exchange rate increased marginally by 13 basis points. The monetary instruments still remained the main pull factors in our forecast but their increase further put pressure on inflation in February.
“The increase in our food inflation forecast, as the economy recovers from the impact of a flood, was driven by the currency redesign policy. The policy disrupts the entire food supply chain and thus pass-through to food prices, especially staple food such as bread and rice.
“A major challenge for monetary policy instrument potency remains its difficulty in directly impacting demand-side drivers of inflation, particularly household consumption patterns”, CAPE further stated.
Inflation rate in Nigeria rose to 21.82 percent in January 2023, compared to December 2022 when it declined to 21.34 percent.
Prices of food, which is the most relevant in the CPI basket, recorded an upturn to 24.32 percent in January from 23.75 percent in the prior month, while the annual core inflation rate, which excludes farm produce, accelerated for the tenth straight month to a 16-year high of 19.2 percent in January, up from 18.5 percent in the prior month.