Dear Subscriber,
The jury is out as to what the true level of inflation is in Nigeria. One thing that is clear is that it is widely believed that inflation is high and is rising.
On Friday, September 15, the NBS will release its official inflation data. We are again projecting another increase in Nigeria’s headline inflation to 25.47% in August from 24.08% in July. This will be the 8th consecutive monthly increase and the highest level in 18 years. The last time inflation got to this level was in August 2005.
The contributory factors to inflation in Nigeria remain basically the same. Prominent among these factors are naira depreciation, higher logistics costs, money supply growth, and cost-push variables. In the months of July and August, the Naira swung between N775/$ and N955/$ at the parallel market. The pass-through effect of a weak currency on domestic prices remains potent. Notable among the commodities that have high import contents are wheat, sugar, rice, and dairy products.
Inflation is not Nigeria-specific – It cuts across SSA
Some of the SSA countries under our review recorded higher inflation rates, owing primarily to currency weakness and increasing energy costs. In August, the Zambian Kwacha depreciated by 6.69% to K20.26/$, pushing inflation to a 17-month high of 10.8%. Angola’s inflation also increased for the third consecutive month to 12.12% in July, largely due to the reduction in fuel subsidies.
CBN likely to maintain its hawkish stance
This is political season in Abuja where political issues are more profound than economic reality. It is against this background that the MPC will meet on September 25-26. Prudent policymaking will suggest that a tightening is almost imminent whilst the political reality suggests otherwise. It is our view that a tightening at this time is almost inevitable.
In the download and link, the FDC Think Tank shares its estimates for August inflation and likely policy reactions.
Do enjoy your read…….
