FDC ECONOMIC BULLETIN – APRIL 08, 2022 (Re: Headline inflation to accelerate on cost pressures)

Dear Subscriber,

The NBS is scheduled to publish the headline inflation and related data for March on Thursday, April 14. Our time series model and survey of commodity markets in the Lagos Metropolis indicates that there will be an acceleration in official headline inflation to 15.83% with both food and core inflation expected to rise to 17.30% and 14.39%, respectively.

We also expect the supply disruptions stemming from the ongoing Russia-Ukraine war to continue to push up commodity prices both globally and in the domestic market. In Nigeria the price of diesel is trading around N750/litre, a far cry from the previous N450/litre seen in January. The high diesel price is further compounded by the epileptic power supply in the country which is forcing heavy reliance on diesel powered generators for electricity. High diesel prices have also trickled down into the transportation and distribution costs for food commodities.

MPC getting backed into a corner

Headline inflation is likely to rise this month and in May as well. The MPC has long held onto its accommodative policy stance but this is likely to change as inflation shows no sign of slowing down. The MPC was divided at its meeting in March, with 4 out of 10 members voting for a rate hike. The MPC could decide to hold interest rates steady again this month in hopes of an unlikely but possible reversal in inflation, but the committee is widely expected to raise rates in May.

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

Do enjoy your read…….