Analysts See February’s Inflation Slowing As NBS Releases Report Today

Nigeria’s headline inflation rate in February is projected to slow down after rising to a fresh 17-year high of 21.82 per cent in the previous month.

The National Bureau of Statistics is expected to release the report for the consumer price index, used to measure inflation, today.

Analysts at Financial Derivatives Company Limited (FDC), in their latest economic bulletin report, said February’s headline inflation could decline by 0.86 per cent to 20.96 percent from 21.82 percent in January due to the base effects.

“Last year, inflation climbed in February to 15.7 per cent from 15.50 percent in January as commodity prices spiked on the back of Russia’s invasion of Ukraine,” they said.

The report highlighted that another reason for the expected slowdown in inflation is the exchange rate. “In February, the parallel market rate was relatively stable at N752/$, while the IEFX rate was flat at N462/$.”

“The exchange rate pass-through to commodity prices currently contributes 65 percent to inflation. Other factors likely to accentuate disinflation are the price of fuel, which declined by 58.3 percent in January as supply picked up gradually and the naira crunch,” the analysts said.

They added that the scarcity of naira notes stalled cash transactions, tapering consumer demand and inventory build-up by manufacturers. “As such, retailers cut prices to meet slowing demand.”

Johnson Chukwu, chief executive officer at Cowry Asset Management Limited, said the moderation in the inflation rate is going to be flat due to reduction in the prices of goods not because of an improvement in productivity. “It does not reflect the fundamental issue of whether productivity has increased or not.”

In January, the country’s inflation rate rose after slowing down in December for the first time in 11 months as a result of petrol and cash shortages in Africa’s biggest economy.

According to the NBS, the price growth quickened to 21.82 percent from 21.34 per cent in the previous month and 15.60 percent a year earlier.

“The contributions of items on a class basis to the increase in the headline index are: bread and cereal (21.67 percent), actual and imputed rent (7.74 percent), potatoes, yam and tuber (6.06 percent), vegetable (5.44 percent), and meat (4.78 percent),” it said.

The NBS said food inflation, which constitutes 50 percent of the inflation rate, was 24.32 percent in January, up from 23.75 percent in the previous month and 17.13 percent in January 2022.

It said the rise in food inflation was caused by increases in prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, vegetable, fruits, meat, and food products.

Core inflation, which excludes the prices of volatile agricultural produce, stood at 19.16 percent in January, up from 18.49 percent in December.