Nigeria’s headline inflation is projected to continue its upward movement in November by 0.57% to 14.8%, close to the 15% projected by some analysts. This will be the 15th consecutive monthly increase of headline inflation. Also likely to increase are food (17.5%), core (11.3%) and month-on-month (1.5%) sub-indices.
November is the first month in which the impact of the increase in the price of PMS and a partial rise in electricity tariffs will feed into the inflation basket. In the meantime, the FG has announced a N5 per litre reduction in the pump price of Premium Motor Spirit (PMS) effective December 14. While this could slightly ease pressures on consumers’ disposable income, it is highly unlikely that transporters will reduce their fares as a result of this price fall. It also raises fundamental concerns about the deregulation of the downstream petroleum industry and questions the authenticity of the deregulation process.
Another major threat to price stability in Nigeria at this time is falling output. This is largely due to the closure of the land borders, insecurity in the food belt, slow forex disbursement and rationing. Inflationary pressures also increased partially due to money supply growth (3.53%). The CBN has intensified efforts towards achieving price and exchange rate stability through increased forex supply and an introduction of special bills. This is expected to have a positive impact on output, mop up market liquidity and taper inflationary pressures.
In the publication, the FDC Think Tank shares its estimates for November inflation and likely policy reactions.
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