Dear Subscriber,

Nigeria’s headline inflation is expected to increase again in September, rising to 27.57% from 25.80% in August. This will be the 9th consecutive monthly increase in 2023. It will also represent the highest inflation level in the last 18 years (i.e., September 2005). Price increases were most notable in the food basket, predominantly commodities with high import content such as flour, semovita, noodles, and sugar.

Blame it on the Naira

With prices rising, fingers are pointing towards the exchange rate as the major inflation culprit. The naira crossed the psychological threshold of N1,000/$ in the parallel market, pushing up imported inflation despite the relative stability in global food prices. The FAO food price index was relatively flat at 121.5 pts in September.

Apart from the languishing Naira, there are other inflation-stoking factors including higher logistics costs and money supply growth (36% y-o-y). The price of diesel, the major fuel used by trucks for logistics and distribution purposes, surged to a record high of N1,030/litre.

Month-on-month inflation to ease on harvest season impact

Notably, month-on-month inflation, which is a more current measure of price movement, is expected to decline marginally to 2.78% from 3.18% in August, largely due to the harvest season impact. This suggests that inflation is likely to reach an inflection point and could begin to taper in Q1’24.

In the download and link, the FDC Think Tank shares its estimates for September inflation and likely policy reactions.

Enjoy your read!