Carrying out an inflation survey in a lock down environment is tough business and the margin of error usually widens. In spite of these challenges, our price survey in the month of May points towards a 0.13% increase in the annual inflation rate to 12.47%.
The scary part however, is that monthly inflation, which is a better reflection of market realities will jump to 15.73% (annualized). We noticed a surge in the retail prices of specific commodities that are mostly price inelastic like tomatoes, pepper and onions. E.g. the price of a basket of tomatoes jumped by 50% to N12,000. Inflation drivers include exchange rate pass through and higher logistics costs. The new lower petrol price failed to translate into higher aggregate demand by consumers.
We also observed widening price differential between the markets, largely due to the spike in logistics costs. On the average, commodity prices in Sura market are approximately15% higher than at Oyingbo.
A spike in inflation could force the monetary authorities to lean more towards tightening. Also, rising inflation at a time of falling disposable income could be a recipe for social unrest in the face of a pandemic.
In the publication, the FDC Think Tank shares its estimates for May inflation and likely policy reactions.
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