food prices soar
Nigeria: Inflation rate to decline by 0.79% to 15.2% in November, predicts FDC
Nigeria: Inflation rate to decline by 0.79% to 15.2% in November, predicts FDC
As the National Bureau of Statistics (NBS) is scheduled to announce the November inflation rate on December 15, Financial Derivative Company (FDC), a Nigerian-based financial and economic consultant has predicted that inflation would register another decline.
The FDC prediction which is contained in its current bulletin, said that official headline inflation will decline again by 0.79% to 15.2%.
In 2021, Nigeria’s inflation rate is projected to reach 16 percent. In January 2021, the inflation rate in urban areas of Nigeria grew by 17 percent compared to the previous months, while the rural inflation rate experienced an increase of 15.9 percent. In 2020, Nigeria recorded one of the highest inflation rates worldwide.
Nigeria’s annual inflation rate fell for the seventh straight month to 15.99% in October of 2021, from 16.63% in September. It was the lowest rate since last December, largely due to a sustained moderation in food inflation since April (18.34% vs 19.57% in September) and despite the naira’s ongoing depreciation. The annual core inflation rate, which excludes the prices of agricultural produce, also dropped to a four-month low of 13.24% in October, from 13.74% in the prior month. On a monthly basis, consumer prices increased by 0.98%, following a 1.15% rise in the previous month
FDC survey of Lagos markets showed that the prices of staple food items fell sharply by an average of 22.46% in the last year. For example, a basket of tomatoes is selling for N20k (2020: N35k), onions – N45k (2020: N80k) whilst the price of rice and pepper remained flat. The general tapering of food prices is mainly as a result of harvests but also partly due to price resistance by financially embattled Nigerian consumers.
“Based on our econometric model, official inflation is likely to decline again in November to 15.2% from 15.99% in October.
“This will be the 8th consecutive monthly decline and will bring the official inflation rate to its lowest point in 11 months. In Lagos, the price of staple food items declined by an average of 22.46% in the last year due to harvest supplies on one hand and consumer price resistance on the other hand.
“However, prices increased across the non-food basket. The price of diesel, cooking gas, transport costs (road, air) remained stubbornly high, suggesting a likely increase in core inflation (which is inflation less seasonalities) to 13.51% from 13.14% in October. More so, inflation risks are elevated as the FGN plans to fully deregulate the downstream oil sector in early 2022.
With the exception of core inflation, we expect all inflation sub-indices to decline in November. Food inflation is projected to fall by 1.14% to 17.2% while month-on-month inflation is expected to decline by 0.05% to 0.92% (11.94% annualized).
This will be partly supported by improved supply due to the harvest amid weak aggregate demand. Our survey of the Lagos market showed that the price of tomatoes, onions, rice and pepper declined by an average of 22.46% on an annual basis and by 4.72% on a monthly basis.
Even though the moderation in headline inflation is sustained, Nigerian inflation remains a ‘silent thief’. It is still above the upper limit of the CBN’s target (9%).
The CBN has also consistently maintained that inflation rate above 12% is growth retarding. Nigeria’s high inflation rate is forcing ambitious investment in high yield asset classes especially crowd-funded Agric tech. The downside has seen most of these platforms crash and the masses losing more money as against their initial goal.
