The NBS released the July CPI report this morning. The official report showed that Nigeria’s headline inflation surged to 19.64% in July, which is 1.04% higher than June inflation rate of 18.6%. This is the 6th consecutive monthly increase and the highest inflation rate in 17 years.
The continued spike in inflation largely reflects the combined effects of exchange rate pass-through and the surge in diesel prices. Despite the decline in global commodity prices, Nigeria’s food and core inflation surged, reflecting persistence of domestic inflation-stoking factors such as exchange rate and energy prices. The increased transportation and logistic costs resulting from the surge in diesel price continue to elevate food inflation, which is the major driver of the headline inflation.
Trickle-down Tailwinds from global commodity prices.
Nigeria, being an import-dependent country, is expected to benefit from the general decline in food prices: the global food price index declined for the fourth consecutive time in July, hitting a 4-year low of 140.9. It is expected that the moderation in US inflation, which eased to 8.5% in July will have a knock-on effect on global inflation. The US is the world’s largest economy with 25% of global output of goods and services.
CBN unlikely to increase interest rates again in September.
The Central bank will await the GDP numbers expected to be published in August 26. If the numbers are positive, the MPC may be reluctant to increase the interest rates in its next meeting scheduled to hold in September 2022.
In this edition of FDC Economic Bulletin, the FDC Think Tank shares its thoughts on the impact of July inflation numbers on the economy.
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