Dear Subscriber,
The CPI report for June is scheduled to be published by the NBS on July 15th. Based on our time series model and survey of major retail markets in the Lagos Metroplex, headline inflation is projected to surge by 0.39% to 22.8% in June, with food inflation rising to 24.85% (18-year high) due to the Eid-el-Kabir celebration and planting season effect. Notably, the price of pepper jumped by 225% to N65,000 while the price of tomatoes peaked at N110,000 before slipping back to N75,000.
The seesaw price movement was more in response to consumer resistance and switching to substitutes. The customer behavior in the local markets has been a classic example of the income and substitution effect of price changes.
Exchange rate pass-through effect on domestic prices
One of the key developments in June was the de-segmentation of the forex market, which led to a 42.79% depreciation in the value of the Naira at the I&E window (N825/$). In addition, the exchange rate for computing import duty was adjusted by 40% to N589.45/$ from N422.3/$. This is expected to push up the prices of commodities with import content. Already, the price of flour has increased by 5% while the impact on other commodities will be more pronounced in July.
In the download, the FDC Think Tank projects inflation numbers for June and their impact on businesses and the economy.
Do enjoy your read…
