Ahead of the official release of the September 2023 inflation rate by the National Bureau of Statistics (NBS), CAPE Economic Research and Consulting has projected inflationary pressures to remain heightened at 27.75 percent.
At 25.80 percent, Nigeria’s headline inflation soared to an 18-year record-high in August 2023, representing 1.72 percentage points higher than the 24.08 percent recorded in July 2023.
Also, despite being in the harvest period, food inflation rate, year-on-year, accelerated to 29.34 percent in August 2023 from the 23.12 percent reported in August 2022, representing an increase of 6.22 percentage points.
CAPE Economic Research and Consulting, in its October 2023 newsletter, said, “Inflation is expected to further heighten in September 2023. Our forecast showed that inflationary pressure would heighten as headline food and core inflation are expected to rise to 27.75, 31.96 and 22.01 percent, respectively.
“Our analysis showed a robust impact of food prices and exchange rate on headline inflation. However, housing and utility prices had a more robust impact in September 2023 than August 2023.”
According to CAPE, it also suggests that impact of increase in energy prices and exchange rate continues to permeate into the economy and would continue to reflect over a 12-month period at the least, through a base effect.
It pointed out that the key drivers of core inflation forecast were clothing and footwear, education, transportation and alcoholic beverages.
CAPE stressed that it also showed that the contribution of alcoholic beverages to core inflation heightened in its September 2023 forecast compared to August 2023.
“Our analysis also established monetary policy instruments as pull factors, suggesting some level of monetary policy instruments potency in anchoring expectations in Nigeria, while structural factors continue to remain dominant in driving inflation in Nigeria,” it said.
It explained that a major challenge for monetary policy instrument potency remains its difficulty in directly impacting demand-side drivers of inflation, particularly household consumption patterns as the conventional pass-through channels of monetary policy are evidently frail in Nigeria.
The CAPE noted that upside risks to inflation are the burgeoning fiscal deficit, monetary financing, removal of fuel subsidy and the effect of monetary tightening in advanced economies leading to capital outflows and exacerbating exchange rate pressures as well as its pass through to prices.
It stated that economic agents are expectant of actions and policy direction of the new leadership at the Central Bank of Nigeria (CBN).
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