Dear Subscriber,

Our recent market survey reveals a further build-up in inflationary pressures by 0.07% to 34.26% as supply chain disruptions continue to take their toll on prices. The foreign exchange uncertainty and the supply bottlenecks together with an increase in the price of petrol (PMS) are culminating in a further rise in headline inflation. Food inflation is likely to inch up to 40.93% despite the harvest season. Core inflation is expected to move in the same direction to 27.48%. We further estimate that month-on-month inflation, which reflects the most current economic conditions, will increase marginally to 2.37% (annualized at 31.26%).

Hungry times – A bizarre bite of reality

Food inflation has become a major concern in Nigeria, affecting both the rich and the poor. This surge in food prices has significantly increased the cost of living, straining household budgets across all income levels. The rise in the cost of living has led to several cascading effects on the economy but what is most worrisome are the unprecedented hunger protests in most parts of the country. Such widespread demonstrations over hardship are a first for Nigeria and reflect the severe impact of inflation on daily life.

Announcement of duty waiver on staples vs market realities

There is a huge disparity between the FG short-term price reduction measures, through the duty waiver on staples and the market realities. The price of rice has increased by 6.25%, reflecting a shortage in the supply of rice. Traders have exploited the situation to re-price their inventory upwards. As a result, consumers are not seeing the expected relief in staple food prices as anticipated.

Outlook

In the near term, i.e. the inflation report for July is expected to remain elevated at 34.26%. However, with the base effects of 2023 combined with the impact of the stimulus package (duty waiver on imports), we see inflation tapering in the month of September.

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