Expect a persistent rise in Nigeria’s headline inflation in October 2023, the 10th consecutive monthly increase, hitting 27.8%. Analysts at Financial Derivatives Company Limited (FDC), led by economist Bismarck Rewane, forecast a 1.08% spike from September’s 26.72%, preceding the official release of the November 15, 2023, inflation report by the National Bureau of Statistics.
FDC’s latest economic bulletin, based on Lagos market surveys and time series models, emphasizes that if their projection holds true, this would constitute the highest inflation level in 18 years. Additionally, they anticipate a 1.21% increase in the food basket, soaring to 31.85%, with key contributors being flour, semovita, sugar, and noodles.
Traditionally, October through December sees a deceleration in food prices due to the harvest season. However, FDC notes an anomaly this year, attributing it to the cross elasticity of demand impact of imported foods on locally produced commodities like yams, garri, beans, and cassava. For instance, the price of wheat flour has surged by 46.88% to N47,000 per 50kg bag, leading to a 16.7% increase in yam prices to N3,500 per tuber.
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FDC expects the upward trend in core, food, and headline inflation to persist into November/December, albeit at a slower pace. They attribute this moderation to the deceleration in the pace of Naira depreciation, with a trading range of N1,150 – N1,200/$.
In a noteworthy development, the Central Bank of Nigeria has allowed the stop rate on OMO bills to rise by 349 basis points to 17.98% per annum. FDC suggests that this move is likely to boost national savings, thereby contributing to a medium-term reduction in inflation rates. For insights on navigating inflation, businesses are urged to consider adopting cloud technology.
