Dear Subscriber,
Inflation has become Nigeria’s enigma
Understanding and interpreting inflation data is becoming a source of acrimonious debate among Nigerian households, consumers, corporates, and unions.
Everybody believes that the actual inflation rate is higher than what is published, but nobody seems to know the true rate of inflation. This month is critical in deciphering the current inflation level and trend.
In a few days, we are likely to be inundated by three sensitive data releases:
- The rate of inflation in Nigeria using the old methodology,
- Inflation level as computed under the expanded and reconstituted basket,
- Inflation data using a more recent base year.
We conducted our latest market survey using the old methodology and basket, being cognizant of the fact that January is typically a slow month and traditionally a period of falling prices.
Our survey revealed the following trend:
- Headline inflation is expected to decline to 33.35% from 34.80%,
- Monthly inflation is falling faster than headline inflation – fell to 1.54% (annualized at 20.17%) from 2.44%,
- All inflation sub-indexes are moving in the same direction,
- Prices of some major commodities declined (especially rice, beans garri, etc.).
The falling inflation has been buoyed by the appreciation of Naira in the forex market as well as the decline in petrol/diesel pump prices. However, just as every economist knows, prices are sticky downward, we are seeing factor prices decline but are not having a corresponding drop in commodity prices and transport fares.
All eyes are on two key events: first, the upcoming inflation report, and second, the MPC meeting on February 19 and 20, which will determine interest rate movements and anchor market expectations.
The FDC Think Tank shares its estimates for January inflation and the likely policy reaction in the download and link below.
Do enjoy your read…
