The National Bureau of Statistics (NBS) is set to release the consumer price index report, which reveals Nigeria’s inflation rate for the month of February 2022, as economic analysts have predicted higher inflationary numbers for the month.
Recall that the NBS report for the month of January 2022, prints the country’s inflation rate at 15.4%, a marginal decline from the 15.8% recorded in the previous month.
However, recent developments in the month of February have suggested a reversal in the movement of Nigeria’s inflation rate.
What happened in February
In February, fuel scarcity hit some major cities across the country with Lagos and Abuja bearing the major brunt as adulterated fuel was found among imported petrol product. This caused a significant supply gap as the regulators called back all affected fuel already in circulation.
According to the federal government, the fuel scarcity in some states in the country is due to the limited methanol quantities above Nigerian specifications discovered in the supply chain. The fuel scarcity, which lasted all through the month, caused significant spike in transport costs, affecting other items.
Similarly, the cost of business operation also surged, following epileptic power supply across the country as demand for petrol rose significantly, forcing Nigerians to buy a litre of petrol for as high as N400. In the same vein, the price of diesel also surged significantly during the period and has already surpassed N600 per litre.
The surge in the price of diesel is attributed to the continuous increase in the price of crude oil, which naturally affects the landing cost of diesel in Nigeria since it is not a subsidized product in the country.
What experts are saying
According to Samuel Bamidele, Head of Research at Philips Consulting Limited, he predicts a gradual uptick in inflation figures for the month of February. “I expect to see a gradual uptick in inflation for February, on the back of the fuel scarcity which initially started with the report of adulterated petrol supply across the country,” he said.
“Unfortunately, while the news of adulterated product is waning, the big elephant in the room – subsidy, now portends an even bigger concern for both core and food inflation. Due to the rising oil price, the landing cost of PMS is speculated to hover around N400 per litre. Again, the price of diesel is also trending up.”
“Aggregating the impact of rising oil prices amidst subsisting structural issues like imported inflation through FX pressure and supply chain disruption, I expect inflation to trend even more upward in the coming months. Firms, businesses, and individuals depend significantly on these products, and it’s clear where the burden will be shifted,” he adds.
He however added that “the question remains if the current positive oil price shock will be short-lived? Otherwise, that’s a major external factor that may drive inflation back to the level it was sometimes in 2021.”
Commenting in the same direction, Olumide Adesina, financial analyst at Quantum Economics, stated that he does not expect the Russia-Ukraine war to affect due to the timing, however, he believes inflation rate could still move upward in February due to the continuous rise in the cost of items.
“Given the timing of the conflict, the Russia-Ukraine crisis should not affect Nigeria’s inflation readings in February. Nevertheless, the continued rise in manufacturing costs, particularly among FMCG companies, may raise inflationary readings for the month of February,” he said.
He also added that “In terms of monetary policy, I expect the central bank to keep putting pressure on inflation via the cash reserve ratio; however, at least one interest rate hike is expected.”
Similarly, Opeoluwa Dapo-Thomas, an international financial analyst also sees Nigeria’s inflation rate going upward in February. In his words, “well, if you have seen last week’s inflation data from the United States – you would see inflation is on an upside trajectory. So, we would be surprised if things are different here as costs of goods generally have increased.
“The poor power situation and fuel scarcity might have increased business costs and that will reflect in the cost of living and goods generally. So, a few ticks upward is expected and it would take a lot of effort for inflation to be curbed given the escalating tensions in Russia and Ukraine.”