Dear Subscriber,

The NBS will release its CPI report for the month of September on October 15. Based on a survey of major markets in the Lagos Metropolis and our time series model, we are projecting another increase in headline inflation to 20.9%. It is worth noting that the pace of price increase is slowing. This might suggest that the price inflation may be approaching a point of inflection. Our study also indicates that there will be an increase in both the annual food (23.9%) and core (17.78%) sub-indices. The major causative factors propping up the price level, remain the “usual suspects” i.e., a weaker domestic currency (N732/$), higher logistics costs and excess liquidity

Inflation expectations in Q4

Nigerian inflation is driven more by the transmission effect of forex scarcity on prices and high cost of energy. In the last month, the naira has depreciated by 3.97% in the parallel market. It traded at N704/$ at the beginning of September to N732/$ this week. However, due to a possible long outside lag (the amount of time it takes for government’s policy to have a noticeable effect on the economy) the impact of the current MPC policy rates hike might not have an immediate effect. This suggests that inflationary pressures loom, and would still continue in the next quarter, especially with the elevated price of diesel and other sources of energy. However, we expect the monetary policy committee to maintain status quo in its next meeting.

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