Dear Subscriber,

The inflation data released by NBS revealed a higher-than-anticipated surge in retail prices in the month of March 2024. Headline inflation spiked by 1.50% to 33.2% from 31.7% in February. This is the highest level since 1996, it also was far in excess of the consensus forecast rate of economists.

Most analysts were of the view that headline inflation would climb marginally because of the dampening effect of a stronger naira in the forex markets. The data showed a significant increase in both the food (40.01%) and non-food (25.90%) baskets. Also underpinning the structural characteristics of inflation in Nigeria is the fact that core inflation increased from 25.13% to 25.90%. The limited impact of naira appreciation on the price level, was more as a result of retailers repricing their inventory on an average cost basis which does not fully reflect the marginal cost of imported commodities.

Therefore, we expect the moderation in retail prices due to a stronger naira to become more apparent in the April/May survey. At this level of headline inflation (33.2%), the MPC may be forced to further tighten rates at the next meeting in May 20-21, just ahead of the first anniversary of this administration.

The FDC Think Tank analyzed the January inflation data and its implications for businesses and the economy in the download and link below.

Enjoy your read!