Based on our monthly price survey, headline inflation is projected to rise to 14.5% in October from 13.71% in September. This means that inflation will be rising for the 14th consecutive month. It would also be the highest level in 33 months. Food inflation will be the most affected as it is estimated to climb to 17.05%. Other sub-indices are also expected to move in the same direction. The EndSARS protest magnified existing output challenges and supply chain disruptions. This coupled with money supply saturation, higher logistics costs, CBN’s forex rationing as well as forex restriction for imported finished goods have heightened inflationary pressures.
The CBN had repeatedly held that inflation rate above 12% is growth retarding. That is why a projection of 14% could be an alarm bell for policy makers. But we also expect Q3 GDP numbers to be published the day the MPC meeting starts. If these numbers which do not reflect the EndSARS impact come in lower than expected, it may result in deep introspection at the MPC meeting.
In the publication, the FDC Think Tank shares its estimates for October inflation and likely policy reactions.
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