Inflation may hit 34.56 per cent this month

•Weekly FX turnover increases by 70%

Inflation rate has been projected to reach 34.56 per cent this month. The projection is hinged on the synchronised impact of renewed currency pressures, food demand-supply imbalances, elevated energy prices and unfavourable base effects from last year.

According to Cordros Capital Research, headline inflation remained elevated, rising by 49 basis points (bps) to 33.69 per cent in April, following increased price pressures which primarily reflected the high exchange rate, amid the unfavourable base effects of the prior year.

“Analysing the breakdown, we highlight broad-based pressures across the food and core baskets – food inflation (+52bps to 40.53 per cent y/y) rose to an all-time high, whereas core inflation rose by 94bps to 26.84 per cent y/y.

“Meanwhile, on a month-on-month basis, consumer prices eased by 73bps to 2.29 per cent (March: 3.02 per cent m/m) as the appreciation of the naira slowed price increases in April. We expect the headline inflation to settle at 2.6 per cent m/m in May, translating to an 87bps increase in the y/y inflation rate to 34.56 per cent,” they noted.

Meanwhile, the Foreign Exchange (FX) Spot and Derivatives markets, for the week ending May 17 recorded a turnover of $1.353 billion, representing an increase of 70.04 per cent ($557.24 million) from $795.58 million reported for the week ending on May 10.

According to FMDQ Securities Exchange, the week-on-week (WoW) increase in total turnover was solely driven by the 73.9 per cent ($568.73 million) increase in FX Spot turnover, despite the 42.9 per cent ($11.49 million) decrease in FX Derivatives turnover.

The exchange said the week-on-week decrease in FX derivatives turnover was solely driven by the 42.9 per cent ($11.49 million) decrease in FX forwards turnover, while there was a continued lack of activity in both the exchange-traded FX futures and cleared naira-settled non-deliverable-forwards-markets.

It further explained that the total value of transactions on the FX spot market, for the week ending on May 17 was $1,337.56 million, representing an increase of 73.97 per cent ($568.73 million) from the value of transactions executed in the week ending May 10 ($768.83 million).

Also, for the week ending May 17, the average Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate was $/N1,499.32, compared to $/N1,420.79 recorded in the week ending on May 10.