Nigeria’s inflation rate remains double-digits despite recent declines-Phillips Consulting Chris Uba Phillips Consulting, a Nigerian-based management consulting firm renowned for its provision of business advisory services and strategy development, has predicted that Nigeria’s inflation rate will remain double-digits, further stoking consumer purchasing power. It also argued that the continued dependence of Nigeria on administrative measures to address FX shortages underscore uncertainties and increases the risks of a sudden and large adjustment in the exchange rate. Recall that Vice President Yemi Osibajo had recently called for a market reflective exchange rate and that with an increase in the supply of dollars, the rates will drop and the value of the Naira will improve. According Phillips Consulting whose projection is contained in its current analysis on Nigeria’s economy, inflation rate has continued to decelerate in recent months. In October 2021, headline inflation dropped further to 15.99% from 16.63% recorded in September 2021. “ This indicates that the headline inflation rate has now declined for a straight 7-month. However, given the implementation of cost-reflective electricity tariffs, FX rate adjustment, pending subsidy removal, and insecurity (farmer-harder crisis), inflation is projected to remain double-digits, further stoking consumer purchasing power It also said “Despite the ongoing unification effort by the policymaker, the FX policy environment remains under pressure. Given the advantage of the current global conditions, improving current accounts and robust oil prices, efforts must be accelerated to unify the rates. According to the recent Article IV released by the IMF, the continued dependence of Nigeria on administrative measures to address FX shortages underscore uncertainties and increases the risks of a sudden and large adjustment in the exchange rate. The management consulting group also insisted that the lingering fuel and electricity subsidies have continued to stoke pressure on the government financing capacity , adding that “as the economy recovers, fuel subsidies must be removed to a market-based pricing mechanism stipulated in the 2021 Petroleum Industry Act. In addition to this, the quick implementation of cost-reflective electricity tariffs scheduled for January 2022 is encouraged.” On the upside, the economy will be supported by implementing the landmark Petroleum Industry Act, which is expected to unlock opportunities in the oil sector in the coming quarters, resulting in higher output and stronger growth in fixed investment and exports. The article noted that the Nigerian economy has continued to recover steadily from the historic downturn printed in 2020, attributable to increased vaccine rollout bolstering consumer confidence and stimulating economic activities. According to the report recently published by the National Bureau of Statistics, the country’s GDP grew at 4.07% (YoY) in the third quarter of 2021 (Q3’21), up from 5.36% in the previous quarter and -3.14% in Q3’20. While the country’s growth slowed down in Q3’21 as the high base effect continued to wane, the growth rate printed in Q3’21 was stronger than most analysts’ forecasts. Recall, in Q2’21, output rose by 5.4% (y-o-y), mainly reflecting base effects from transport and trade sectors and continued strong growth in the IT sector. According to the World Bank and IMF, the Nigerian economy is expected to grow at 2.7% and 2.6% in 2021. The strong growth posted in the past two quarters indicates that business and economic activity are inching towards the pre-pandemic level. On the non-oil sector the Phillips Consulting said the non-oil sector buoyed by the easing lockdown measures and government pro-growth policy support and interventions, “ continues to drive the economy on the path of recovery. In Q3’21, the non-oil sector printed an impressive 5.44% growth, up from -2.52% in the corresponding period of 2020. Broad sector breakdown performance shows that the service continues to move in a positive trajectory, driven by a strong rebound in the financial services and ICT sector. The financial sector rebounded in Q3’21, printing a growth of 25.5% on the back of increased money in circulation. After contracting in the previous quarter, the ICT sector rebounded with a growth of 9.66% during the quarter. Other non-oil sectors that posted grew in the quarter includes manufacturing (4.29%), construction (4.10%), Arts and Entertainment (3.68%) and Hospitality (2.09%). Instructive to note that in Q3’21, the Manufacturing sector posted its highest GDP quarterly growth rate since 2014. During the quarter, the sector grew at 4.29% compared to 3.49% in the previous quarter. The growth momentum sustained in the manufacturing sector is traceable to reopening the country’s land borders, buoyed by improved business and economic activities. However, quarter-on-quarter, the non-oil sector slowed down slightly compared to the 6.74% growth posted in the previous quarter. Notably, the slow-down in the non-oil sector was driven by sectors including Agriculture, Real Estate Trade, and Road Transport. For instance, the agriculture sector recorded a modest growth of 1.22% in Q3’21 from 1.30% in Q2’21. The lower-than-expected growth recorded in the agriculture sector is driven by rising insecurity in key farming areas in Nigeria’s northern and central states and shrinking consumer purchasing power. Other Non-oil sub-sectors that slowed in Q3’21 include trade (11.90%), transportation (20.61%), real estate (2.32%) and professional services (1.11%).