Dear Subscriber,

In anticipation of the National Bureau of Statistics releasing its March inflation data on April 15th, 2024, we are forecasting an uptick in headline inflation, to 32.15% from 31.7% in February. This increase is partly attributed to the confluence of festivities Easter and Ramadan, which increased consumer demand and changed spending patterns. In addition, seasonality increased supply shortages resulting from planting season. While there were significant declines in prices of various food commodities, especially imported commodities, stability was observed in others, Food inflation is expected to rise marginally to 38.33% from 37.92%, while core inflation is expected to increase to 25.27% from 25.13%. On a month-on-month basis, both food and core inflation are expected to decline.

600bps cumulative Hike in policy rate – Time to reflect

The CBN had in March hiked its policy rate by 200bps to 24.75% in a further tightening of liquidity. The effect of the cumulative increase of 600bps in the first quarter of 2024 has been a slowing of the rate increase in inflation. The trajectory of price increases both annual and monthly will seem to suggest that inflation is fast approaching a point of inflection. Most analysts are of the view that both core and food inflation will taper in the second half of 2024. The EIU is more bullish and is forecasting an inflation rate of 15.1% in 2025.

Outlook

Inflation expectations are that prices will rise in the near term before dipping in the second half. This will be after a sell-off of the existing expensive inventory of traders. However, the long-anticipated wage review is likely to reignite inflationary pressures, thus prolonging the current high inflation rate.

In the download and link, the FDC Think Tank shares its estimates for March inflation and likely policy reactions.

Enjoy your read!