Dear Subscriber,

The NBS is scheduled to publish the February inflation report on March 15, 2023. Our time series model and survey of the commodities market in Lagos state indicates that headline inflation will slow by 0.86% to 20.96% on base effects and a relatively stable exchange rate. If this occurs, Nigeria will have the lowest inflation rate since September 2022.

Core and food inflation is expected to move with headline inflation, falling by 1.1% to 23.22% and 0.08% to 19.08%, respectively. However, the month-on-month inflation is projected to maintain its upward trend by 0.08% to 1.91%, indicating that inflationary pressures are still titled to the upside.

Will the MPC keep up its quantitative tightening?

The expected decline in inflation, together with the increase in Q4’22 GDP growth to 3.56% will be major considerations for the monetary policy committee at its next meeting in march. While maintaining the status quo seems like the best option to keep borrowing costs low and encourage output growth, the CBN also has to weigh the risks of expanding negative real rates of return on investments and the changes of the naira falling as the US Fed keeps raising rates.

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

Do enjoy your read…