As Nigeria prepares for the release of its October inflation data by the Nigerian Bureau of Statistics, experts are projecting that inflation will remain persistently high.
The factors contributing to this sustained inflationary pressure include elevated fuel prices, the depreciation of the naira, and widespread flooding, which has severely disrupted agricultural activities across the country.
In a recent weekly report, researchers at Cowry Assets Management Limited predicted that despite measures taken by the Central Bank of Nigeria’s Monetary Policy Committee and the government’s introduction of zero-duty on selected food imports, inflation would continue to rise.
Cowry analysts foresee October inflation reaching a staggering 33.10 percent.
Their projection for the October Consumer Price Index is largely driven by several economic disruptions.
These include recent hikes in petrol pump prices, the ongoing impact of flooding in various regions, and the sharp reversal in food price indices caused by disruptions in supply chains, worsened by insecurity and currency devaluation.
Analysts further noted that unless decisive fiscal actions are taken to manage the cost of fuel and mitigate its scarcity, core inflation could remain high.
“We expect a 33.10 per cent CPI for October based on the ongoing impact of recent PMS (Premium Motor Spirit) price adjustments, flooding in key agricultural areas, and the reversal in food price indices due to persistent supply chain disruptions caused by insecurity and the weakened naira,” the report stated. It continued, “Core inflation may remain elevated unless fiscal authorities intervene effectively to manage fuel prices and ease scarcity. Without such interventions, transportation costs will likely rise further, which will only add to the inflationary pressures, thereby impacting the headline inflation index.”
The report also highlighted the Central Bank of Nigeria’s recent tightening measures, which include raising the Monetary Policy Rate to 27.25 percent and increasing the Cash Reserve Ratio for both deposit money banks and merchant banks.
However, despite these moves, Cowry Research emphasized that Nigeria’s structural challenges—such as poor infrastructure, high fuel costs, and logistical bottlenecks—continue to undermine the effectiveness of monetary policies.
The report stresses that resolving these deeper, structural issues is essential for stabilizing prices and achieving lasting economic stability in the country.
Inflation in Nigeria has been on an upward trajectory in 2024, approaching a 30-year high. The inflation rate surged to 33.2 percent in March, up from 31.7 percent in February, mainly due to sharp increases in food and transportation costs following the removal of fuel subsidies and the continued depreciation of the naira.
The situation was compounded by widespread insecurity and flooding in critical agricultural regions, which further exacerbated food shortages.
By mid-2024, inflation peaked at a record high of 34.19 percent in June, marking the highest level seen in the year so far. However, there was a brief reprieve in July and August as inflation eased slightly to 33.4 percent and 32.15 percent, respectively.
This moderation was attributed to seasonal harvests that helped bring food prices down.
Unfortunately, September saw inflation climb again to 32.7 percent, driven largely by persistently high food prices, the impact of ongoing flooding, and the continuing pressure on the naira.
This rise was also heavily influenced by higher energy costs, with petrol prices increasing from N980 to approximately N1,050 per liter in Lagos, and even higher in other parts of the country.
Looking ahead, experts project that these inflationary trends could push the headline index above 35 percent by December 2024, signaling a further deterioration of purchasing power for many Nigerians.
The food inflation rate, in particular, remains a major concern, with year-on-year food inflation reaching 37.77 percent in September, slightly up from 37.52 percent in August.
Factors contributing to this include insecurity, high farm input costs, and the devastating impact of flooding in Nigeria’s food-producing regions.
On a slightly positive note, core inflation, which excludes food and energy, showed a minor decline for the first time in ten months. It fell from 27.58 percent in August to 27.43 percent in September.
However, this decline is expected to be short-lived, with analysts predicting a potential reversal in October, given the ongoing economic challenges.
In conclusion, while there are some signs of moderation in core inflation, Nigeria’s inflationary pressures are expected to remain high in the coming months due to the compounded effects of fuel price hikes, naira depreciation, flooding, and insecurity.
As the Central Bank and government continue to monitor the situation, it remains clear that comprehensive, structural reforms are necessary to stabilize the country’s economy in the long term.
