The impact of people’s response in terms of the quantity demanded of one good when the price for another good change and its effects on locally produced commodities like cassava, yam and tomatoes will contribute to the rise in the March inflation above 15.70 per cent recorded in February.
This was the projection of Analysts from Financial Derivatives Company Limited (FDC) in their latest economic bulletin obtained over the weekend.
According to analysts from FDC, March inflation will rise because consumers are shifting to cheaper substitutes.
Also, increased demand and limited supply of local substitutes are pushing up prices and stoking inflationary pressures.
The National Bureau of Statistics (NBS) will release its Consumer Price Index (CPI) report for March tomorrow, April 14.
“Based on our time series analysis and survey of major markets in Lagos Metropolis, official headline inflation is projected to rise again by 0.13 per cent to 15.83 per cent.
“This brings Nigerian inflation in tandem with global and regional trends. For example, US inflation climbed to a 40-year high of 7.9per cent while inflation in the UK soared to 6.2percent 3 decades high.
“Headline inflation is expected to trend upwards as supply chain disruptions linger. This would be further compounded by increased aggregate demand ahead of Easter and Ramadan celebrations. The continued increase in inflation will further embolden the hawks among the MPC,” the analysts stated.
They further observed that the spike in February inflation was largely attributed to cost pressures (higher energy costs and exchange rate pressures) and the pass-through effects of global supply chain disruptions on imported commodities like wheat.
According to FDC analysis, unlike the previous month, both annual food and core (inflation fewer seasonalities) sub-indices are expected to increase in March.
Food inflation is projected to rise by 0.19per cent to 17.30per cent, while core inflation is estimated to increase by 0.38per cent to 14.39per cent. This is largely due to higher energy costs, and rising imported and domestic food prices.
“Based on our survey, average imported commodity prices rose by 5.4per cent while domestic commodities increased by 29.5per cent.
Month-on-month inflation is expected to increase to 1.67per cent (22.06% annualised) from 1.63per cent (21.42% annualised) in February 2022. This is partly because of soaring food and energy costs, FDC explored.
The firm warns that inflation in Sub-, Saharan Africa (SSA) is a ticking time bomb as the Russian-Ukraine war lingers, adding that most of the countries under its review recorded higher inflation rates.
This can be largely attributed to both food and cost pressures. The African continent is largely dependent on imports to complement sub-optimal local production.
The disruptions to the global supply value chain are taking a toll on the SSA region. In a bid to rein in inflation, some African central banks are becoming hawkish in their monetary policy stance, it stated.
The bank of Ghana for instance raised rates by 250basis points (bps), the highest increase in more than two decades. The South African Reserve Bank also increased its benchmark interest rates by 25bps, the 3rd consecutive hike.
“The Nigerian MPC will meet again next month to decide on the monetary policy direction. Based on the current economic realities, the committee will most likely raise rates by 50bps to 12.5per cent per annum (pa).
At its meeting in March, the MPC was more divided on policy direction than it has been in a long while. Four of the 10 members voted in favour of a rate hike, with 3 voting for a 25bps hike and 1 voting for a 50bps hike. This means that Nigerian policymakers are becoming more aware of the risk posed by inflation.
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