*Fear Nigeria Fast Becoming ‘Outlier’ country
The National Bureau of Statistics (NBS) is expected to
release its December 2023 inflation report on Monday, January 15.
However, based on market survey and analysis, respite, by way of reduced prices of goods and services, and particularly food items seems farther than expected.
In 2023, headline inflation maintained its upward trends rising from 21.8% y/y in January to 28.2% y/y in November, with pressure on the food inflation sub-basket as the major drivers.
Specifically, Financial Derivatives Company (FDC) and Afrininvest analysts are predicting between 28.7 and 29 percent further rise, particularly in food prices
Coming amid global downward trend and the inherent disparity, analysts have begun to question the credibility of data being chunned out by the statistics agency monthly.
Besides, they further argue that the figures are at variance with reality as they claim that real inflation should be between 40 and 45 percent.
The Naira Scarcity, accorded to them has continued to compound the challenges of consumers with depleting note and depreciating value.
According to Afrinvest analysts, “Based on our model output, we estimate that the headline rate would accelerate to 29.0% y/y in December, driven by the combined impact of festivity-induced high demand, currency pressure, and the uptick in transportation costs due partly to increase in energy goods prices.”
In the FDC Economic Splash released last week, the analysts said that based on their analysis “which is a combination of our market survey and a time series model, Nigeria’s headline inflation is projected to climb by 0.5% to 28.7%. Our projection will probably be accurate within a margin of error ranging from -0.5 % to +0.5%, meaning that inflation in Nigeria will be at a record high.
In view of the fact that global and regional inflation has slowed and, in many cases, is falling, Nigeria is fast becoming an outlier, which has become a cause for concern.
Analysts question the credibility of Nigerian data and the disparity between its rising inflation and the global downtrend.
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This discrepancy is attributed to imported inflation, driven by nominal global commodity prices and a 38.84% depreciation of the naira in 2023.”
In fact, Bloomberg recently ranked Nigeria’s currency as the third worst-performing currency among the 154 currencies it tracks globally.
They however express confidence that inflationary pressures will reduce in 2024, particularly from the third quarter, noting that, “Inflation expectations are more important than historical inflation. Even though inflation in Nigeria has increased consistently in 2023. Many experts are projecting a significant decline in 2024. According to EIU, inflation in Nigeria is expected to fall to 23.6% in 2024 and 17% in 2025. These projections are not unrealistic, as Nigeria is likely to see a moderation in inflationary pressures in H2 2024.”