FDC ECONOMIC BULLETIN – DECEMBER 12, 2019 (Re: Inflation, Rolling with the Punches)

Dear Subscriber,

Headline inflation continues to succumb to pressures

Based on our survey, Nigeria’s headline inflation is projected to rise to 11.88% in November. Recently, there has been more inflation stoking factors, in spite of the expansion in Q3 GDP growth. Factors such as the border closure, lower interest rates and increased liquidity have had a negative impact on the consumer price index. The closure of the land borders has led to a spike in commodity prices while lower interest rates are a disincentive to save. The average yield on T/bills is now 4.24% below headline inflation, resulting in negative real rate of return.

Rising inflation at a time when the external reserves have fallen below the $40bn threshold (currently $39.44bn) could trigger a change in policy in the near term.

Minimum wage payment likely to pour fuel on to fire

Headline inflation is expected to maintain its upward trend in December due to increased seasonal demand. Rising inflation ahead of the new minimum wage payment and arrears is like pouring fuel on fire.

In this publication, the FDC Think Tank shares its estimates for November inflation and likely policy reactions.

Do enjoy your read…