Site icon Nairametrics

Inflation rate: “No light at the end of the tunnel yet” – Ugodre Obi-Chukwu 

Nigeria’s inflation rate may remain ‘sticky’ in the upcoming months due to the ongoing series of reforms taking place in the country.

This was the position of Ugodre Obi-Chukwu, CEO of Nairametrics while speaking on Channels TV’s Business Morning yesterday.  

He noted that just like Ghana, Nigeria would likely hit its base effects, however, he posited that till the end of the year, we’re likely to see higher inflation rates.  

What he said  

He noted that just like Ghana, Nigeria would hit base effect at some point.  

News continues after this ad

The base effect refers to the impact of past price changes on current inflation calculations. It occurs when the current inflation rate appears higher or lower than it is due to the distortion caused by a low or high reference point from the previous period.  

For instance, if there was an unusually low inflation rate in the previous year, even a moderate increase in prices in the current year might appear as a significant percentage change, making the current inflation rate seem higher than it would be without this distortion.  

Conversely, if there was a high inflation rate in the past, a similar increase in prices might seem like a lower percentage change, masking the true inflation rate. 

He then noted that the exchange rate depreciation witnessed between August and October has not been reflected in the prices of goods and services in the country.  

Ugo supported the assertion that the Federal Government’s Ways and Means borrowing from the CBN is a contributor to the spike in inflation.

He noted that money supply in the country skyrocketed to about N66 trillion from less than N20 trillion after the government started the W&M borrowings. 

FG likely to go back to Ways and Means borrowing 

He also noted that there are signs that this administration would follow the path of the previous administration by continuing Ways and Means borrowing from the Central Bank.  

CBN is limited in solving inflation 

Ugodre noted that the CBN’s options in fixing the inflation problems were quite limited especially due to the nature of inflation in Nigeria.  

What you should know 

On November 15, the NBS put Nigeria’s inflation figures for October 2023 at 27.33%, maintaining a consistent upward trend ongoing this year.

The country is also enroute to the 30% inflation rate projected by KPMG for December 2023.   

Exit mobile version