FDC ECONOMIC SPLASH – MAY 15, 2024 [Re: Nigeria’s Inflation Climbs to 33.69% in April]

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Nigeria’s Inflation Climbs to 33.69% in April

Nigeria announced its official inflation for April today as scheduled. As widely anticipated, headline inflation rose by 0.49% to 33.69%. In line with our forecast that inflation will surge, the outcome of the national data did not take into consideration petrol scarcity. However, next month’s reading will capture the effect. Not as profound as the effect of petrol scarcity was confined to major cities and did not last very long. The impact on inflation is likely to be transient and not fundamental. The renewed pressure on Niara, and the heightened food prices which are further exacerbated by seasonality are the major stoking factors.

The sustained uptick in the general price level was mainly due to a surge in the food basket, which increased by 0.52% to 40.53%. This is not surprising as the second quarter is typically the peak of the planting season. Some of the commodities that witnessed the highest spikes are millet flour, Garri, bread, yam and other tubers, vegetable oil, and fish. Core inflation moved in tandem with food inflation, increasing by 0.94% to 26.84% from 25.90%. This implies that Nigeria’s inflation is more structural than transient.

Monetary policy tightening – The economy’s rollercoaster ride!

Two major uncertainties have impacted inflation expectations & psychology in the past few months. These include the price of diesel and Naira misalignment in the forex market. The price of diesel declined by 29.41% to N1200/litre from N1700/litre while the exchange rate appreciated by 82%.  After the CBN policy implementation in February, there was a noticeable decline in the month-on-month inflation by 10bps in March and another 73bps in April. CBN is right on track with what needs to be done to rein in inflation. The MPC meets next week, and expectations are for either a 50bps or 100 basis points increase, in line with most other Central Banks in the World.

The FDC Think Tank analyzed the April inflation data and its implications for businesses and the economy in the download and link below.

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