Dear Subscriber,

Inflation to continue its upward trajectory in July & Q3

The National Bureau of Statistics (NBS) is to release its July inflation data this afternoon. Based on our recent market survey, we are forecasting a 0.24% increase in the headline inflation to 12.8% with a trend towards 13%. The factors that are likely to push the inflation rate upwards in July are primarily driven by suppliers’ reaction to the 20.4% increase in the price of PMS to N148.7/litre, the limited impact of forex rationing and its pass through effect on retail prices, and the lingering effect of supply chain disruption at a time of partial reopening of the economy. Whilst July is the beginning of the harvest season, the impact of the harvest is likely to be felt more in the months of August and September.

Nigeria is not an inflation outlier in Sub-Saharan Africa (SSA). Other countries including Ghana, Angola and Uganda are also recording higher inflation rates due to increasing price of imported petroleum and food items. The EIU is projecting that average inflation across the region will increase by 0.5% to 8.4% in 2020.

The Nigerian recession, sagging real estate market and Shoprite’s exit

The true extent of the COVID-induced economic crisis will be published on August 26, when the Q2 GDP report is released. GDP growth, which is expected to fall sharply to -3.5%, will drag some sectors down with it. Real estate sector, which contracted to –4.75% in Q1’20, is projected to contract further to –7% in Q2’20. The commercial sub-sector will be severely affected given the reduced foot traffic to malls and the uncertainties surrounding Shoprite’s future in Nigeria. As the ‘anchor tenant’ in most big malls in Nigeria, the possible exit of Shoprite will reduce the retail appeal to investors and consumers.

WAEC kicks off with Mathematics, appalling pass rate expected

The Nigerian education sector witnessed contraction in activities due to the COVID pandemic and the ensuing movement restrictions. Schools have been shut since April and parents are home schooling their children. However, deficiencies in infrastructure, particularly electricity and broadband penetration are major constraints to virtual learning in Nigeria. Unlike in advanced economies, Nigeria is ill prepared for this new normal as its educational system is still largely built around traditional pedagogical learning. For Nigeria to catch up with its peers, it is important to address key issues including educational funding, improved power supply, internet connectivity and teacher training.

In this edition of the FDC Monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.

Enjoy your read!