Dear Subscriber,

Headline inflation in Nigeria is projected to increase again by 0.56% to 23.35% in July. This will be the seventh consecutive monthly increase and the highest inflation rate in 18 years. Apart from the sustained uptick in the general price level, the rate of change in inflation is increasing as the impact of recent policy changes becomes more evident. In a period of one month, the price of PMS has increased twice, first to N488/ltr and then to N617/ltr. Diesel price is also up 5.88% to N720/ltr, pushing up logistics costs. In addition, the naira touched an all-time low of N893/$ at the parallel market.

Higher logistics costs & currency depreciation could limit harvest season effect

Food prices are typically affected by seasonality, rising during the planting season and reducing during harvest due to increased supply. However, the surge in logistics costs, naira depreciation, and the customs duty exchange rate adjustment could keep commodity prices elevated despite the commencement of the harvest season. Also, the closure of some of the land borders and India’s ban on rice exports would reduce supply and further stoke pricing pressures. Food inflation is projected to rise by 0.33% to 25.58%. Core inflation is also expected to increase to 20.49%, which indicates that inflation in Nigeria is not only transient but is structural. It will therefore take time before it will begin moderating sustainably.

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

Do enjoy your read…….