Financial Derivatives Company estimates that the headline inflation for February will climb to 12.30% from 12.05% in January, making it the 6th consecutive monthly increase.
According to the FDC, the food inflation, which is the key contributing factor to general rising inflation, will also rise from 14.7% to 14.98% in February due to the impact of the partial closure of land borders.
Managing Director, Financial Derivatives Company Limited, Bismarck Rewane said the infrastructural deficit and land border closure remains major constraints on the nation’s economic growth in the Q1 2020.
Rewane stated this at the Lagos Business School breakfast session in Lagos, adding that the first quarter growth expectedly slowed down due to the lower consumer spending and reduced economic activities in January.
[READ MORE: Inflation: Headline Inflation sustains uptrend)
Rewane noted that the implementation of new VAT rate of 7.5% in February 2020 contributed to the upward trend of the inflation rate, and so would the increase in electricity tariff in April; although the inflation trend is expected to go at a slower pace.
Rewane observed that the decline in revenue shared in February could be traced to lower statutory and VAT revenues, and it would slide further down in subsequent months due to fall in average oil price.
He also added that growth outlook would be affected by reduced consumer disposable income owing to the hike in Value-Added Tax (VAT) and rising inflation.
Commenting on the current situation with the global oil prices, he saw the nations oil production dropping to 1.5 million barrels per day as the Organisation of Petroleum Exporting Countries (OPEC) mulls additional output cuts. He added that the growth profile in Nigeria could only be maintained by having more aggressive tax collection policies to boost internally generated revenues.
In his explanation, he said, Federal government would need to incentivised the manufacturing sector to increase productive capacity, amid the power shortages and scarcity of primary materials for production in the country.
The Financial Derivatives Company (FDC) is an economic think tank that offers quantitative and qualitative research to provide insights for investment decisions in Sub-Saharan Africa especially Nigeria.
He said that this could put government revenue under severe pressure while gross external reserves could fall towards $34 billion.