•Expectations of households, businesses differ
Headline inflation is projected to reach 34.45 per cent this month on account of Christmas spending and bottlenecks in the produce sector.
The projection is hinged on the fact that structural challenges, which include inadequate infrastructure, high energy costs and logistical inefficiencies continue to hinder the efficiency “of anti-inflation policies.
According to Cowry Asset Management Limited, sustained pressure from the factors as well as the Christmas seasonal effect across the country would ultimately push the inflation rate further to 34.45 per cent this month.
Headline inflation remained elevated for the second consecutive month in October and reached a four-month high of 33.9 per cent, up from 32.7 per cent in September.
Rising food prices, surging energy costs, supply chain disruptions in agriculture and ongoing foreign exchange crisis continue to drive up prices despite the Central Bank of Nigeria’s (CBN) interest rate hikes and the government’s zero-duty import policy, inflationary pressures remain persistent.
“The upward trajectory of the headline index reflects price pressures across all components of the index despite government and monetary policy interventions, such as the CBN rate hikes and the zero-duty import policy.
“This aligns with CBN’s recent inflation expectation survey, which highlights households’ and businesses’ belief that inflation will continue to rise in the next three to six months,” the report said.
Globally, inflation remains a critical concern for policymakers, prompting stringent measures to contain price surges while balancing growth considerations, the analysts said.
They believed that addressing Nigeria’s inflation crisis requires not only monetary adjustments but also significant structural reforms to resolve persistent bottlenecks.
They pointed out that infrastructure improvements, better agricultural productivity and currency stabilisation would be crucial in achieving long-term price stability.
“The Monetary Policy Committee (MPC) is scheduled to meet in two weeks. At its last meeting in September 2024, the MPC raised the monetary policy rate (MPR) by 50 basis points to 27.25 per cent, increased the cash reserve ratio (CRR) for deposit money banks to 50 per cent and maintained the CRR for merchant banks at 16 per cent.
“Given the persistent inflationary pressures, we expect the MPC to tighten further with a potential 25 to 50 basis points increase in the MPR,” the analysts noted.
According to the Central Bank of Nigeria (CBN) inflation survey, inflation perceptions showed a clear divide based on settlement type (rural and urban dwellers) and income level (low and medium earners).
Urban residents reported higher inflation perception than their rural counterparts, reflecting the distinct consumer prices in both the urban and rural areas.
According to the survey, businesses across all types agree that inflation is high, with micro businesses registering the highest inflation perception, likely due to their high disposition to cost increases.
