Amid intensifying pressure on business expenses in Nigeria, experts have projected that the country’s headline inflation could surpass 35% by the end of 2024. This estimate shatters the Federal Government’s 21% inflation target for the year.
Over the weekend, the National Bureau of Statistics (NBS) reported that headline inflation rose to 33.88% in September 2024, driven primarily by increases in core and food inflation. This figure dashed hopes of moderation following slight declines observed in July and August.
Economic analysts have cautioned that a fresh surge in prices could further hinder any chances of stability. November’s headline inflation is expected to reach 34.58%, with projections of a rise beyond 35% in December.
The inflation spike has been linked to persistent price increases in essential goods and services, driven by a volatile exchange rate and rising fuel costs. The exchange rate jumped to an average of N1,740/$1 in November from N1,660/$1 in October, while fuel prices surged beyond N1,000 per litre, compared to around N850 per litre a month earlier. Seasonal factors, particularly demand during the festive season, are expected to exacerbate inflationary pressures.
Economists also noted that the aftermath of flooding continues to weigh heavily on food prices, further straining the economy.
In response, analysts predict that the Central Bank of Nigeria (CBN) will likely raise its Monetary Policy Rate (MPR) in November as part of its inflation-targeting strategy. Such a move could prompt another round of interest rate hikes within the financial sector, further inflating business costs.
Experts at CardinalStone Finance and Investment Limited, a Lagos-based investment bank, said, “Inflation will likely rise in November due to festive-induced demand, insecurity, and the lingering effects of flooding, putting pressure on food prices. Core inflation may also climb due to rising energy prices. We expect headline inflation to reach 34.58% in November and exceed 35% by December.” They further anticipated that the CBN would raise its benchmark rate by 50 basis points in its November meeting.
Analysts at Meristem Securities Limited offered a similar outlook, predicting continued inflationary pressures in the short term due to reduced food supply, holiday-driven demand, higher transport expenses, and elevated fuel costs.
Reflecting on the current inflation trends, CardinalStone analysts noted, “Headline inflation rose by 1.18 percentage points in October, reaching 33.88% year-on-year, surpassing Bloomberg analysts’ projections by 57 basis points. Month-on-month inflation increased to 2.64%, primarily due to rising food and energy prices.”
They highlighted that despite the ongoing harvest season, food inflation rose to 39.16% year-on-year, citing conflict in key food-producing regions and widespread flooding in states such as Borno and Kogi as major contributors. Meanwhile, core inflation climbed to 28.37% due to rising energy costs.
In its review, Meristem Securities confirmed that Nigeria’s headline inflation rose for the second consecutive month in October, reaching 33.88%, up from 32.70% in September. The increase was primarily driven by food inflation, which stood at 39.20%, and core inflation at 28.40%. Rising transportation costs and the lingering effects of flooding were identified as key factors.
The analysts concluded that Nigeria’s inflation, which slowed during July and August, has resumed its upward trajectory, contrasting with trends seen in some other sub-Saharan African countries, as indicated by the International Monetary Fund (IMF).
