Nigeria’s headline inflation is expected to increase by 0.45% to 16.2% in January. If accurate, it will be the 17th consecutive month of rising inflation and the highest level in almost 4 years. Commodity prices typically fall in January due to post-Christmas blues and dwindling purchasing power. However in January 2021, prices have spiked, partly due to import restrictions, shortages and cost push factors.
Nigeria may be on the cusp of a food crisis as the food cultivating region is enmeshed in crisis. Food accounts for approximately 51% of the inflation basket, which is begging for reconstitution. The last time the basket was reweighted was in 2009. Food inflation is now approximately 20% and is projected to rise to as high as 20.9% in January 2021.
February 22 is the scheduled date for announcing the Q4’20 GDP numbers. Analysts are estimating numbers that range from -3.0% to -5.1%. If GDP growth disappoints to the downside, the CBN will not wait for an MPC meeting to intervene in tinkering with the general level of interest rates.
In the publication, the FDC Think Tank shares its estimates for January inflation and likely policy reactions.
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