The National Bureau of Statistics (NBS) is set to release the consumer price index report, which reveals the level of inflation in the country for the month of March 2024 and experts interviewed by Nairametrics have predicted higher rates compared to the previous month.
Recall that Nigeria’s inflation rate rose to an almost 28-year high of 31.7% in February 2024, representing 180 basis points increase from the 29.9% recorded in January 2024 and the highest level since April 1996, when inflation dropped to 31.8%. This means that an increase in March’s inflation rate would effectively translate to a 28-year high.
Economic analysts and commentators alike have predicted that Nigeria’s headline inflation rate is highly likely to increase beyond the previous month’s level albeit at a slower pace. Monthly inflation had surged by 3.12% in February, which the fastest pace of monthly inflation in six months.
However, since the release of the last report, the Central Bank of Nigeria (CBN) has been busy with different policies aimed at strengthening the value of the naira. This includes the resumption of dollar sales to Bureau De Change (BDC) operators amongst other policies targeted at banks’ FX positions.
The apex bank also increased the Monetary Policy Rate (MPR) by a cumulative 600bps from 18.75% to 24.75% between February and March, in a bid to improve the gap between inflation and interest rate as well as to tighten liquidity in the system.
Recall that broad money supply (M3) rose to a record high of N95.56 trillion in February 2024 from N93.72 trillion recorded in the previous month. This is despite the hawkish stance of the CBN. Although currency in circulation recorded a marginal decline to N3.69 trillion from N3.65 trillion recorded in January.
What experts are saying
- In a conversation with Ezekiel Gomos from Jos Business School, he explained that he only sees inflation trending upward in the month of March, however, at a much slower pace compared to the previous month, and opined that the headline inflation might be hitting an inflation point in the coming months.
- According to him, slowing cost of energy products like diesel and petrol in cities like Lagos, Abuja, and Kaduna may counter the impact of rising food prices, leading to a slower pace of jump in the headline index. He also added that the change in the electricity tariff for Band customers will not reflect in the CPI for March and would fully reflect in the April report.
- Gospel Obele, an economic affairs commentator and the Chief Economist of Streetnomics noted that movement towards either side of the curve would be marginal, considering that the inflationary factors still persist despite measures put in place by the monetary authority to tackle FX related crisis.
- He highlighted the importance of the several policies and directives by the CBN to sanitize the FX market but noted that the policies are yet to deal with the root cause of inflation. “If inflation trends further upward, I would expect it to be marginal and if it moves the other way, I would also expect a very marginal decline,” he said.
- According to Victor Onyema, Lead, Portfolio Management Norrenberger Asset Management, headline inflation could settle in the region of 32% in March 2024, reflecting the continuous upward trend seen in recent months.
- He also added that the persistent rise in food prices, FX volatility, elevated energy cost as well as lingering global supply chain issues are some of the major driven factors affecting inflation in the country.
- “Cost of food has been on the rise and will be a major contributor to where inflation prints. We have seen the Naira strengthen in recent weeks; however, food prices remain elevated. The effect of the strengthened Naira is yet to reflect on household food prices,” he said
- “Disruptions in global supply chains are still causing problems, leading to shortages and price hikes for certain goods in Nigeria,” he also added.
Bottom line
As anticipation builds for the release of the eagerly awaited CPI report by the NBS, analysts are foreseeing a tapering of the rate by the second half of the year. This expectation is rooted in the influence of the base effect coming into play, alongside the anticipated stability in the FX market.