By Chinwendu Obienyi
Economic experts have stated that seasonal festive spending is expected to further amplify consumer price increases, exacerbating existing inflationary pressures.
As the holiday season approaches, heightened demand for goods and services typically drives up prices across key sectors such as food, transportation, and retail.
It will be recalled that headline inflation increased to 33.88% year-on-year (y/y) in October, up from 32.70% in September, marking the second consecutive monthly rise.
Also, food prices, which dominate the inflation basket, rose sharply to 39.16% y/y in October from 37.77% in September.
In response, The Monetary Policy Committee (MPC) raised the policy rate by 25 basis points (bps) in November, bringing the cumulative increase for the year to 875 bps, reflecting aggressive monetary tightening.
Analysing the development, analysts at FBNQuest Capital Research, stated that the food prices can be attributed to security challenges and flooding in food-growing regions of the country and the pass-through effect of elevated energy prices on farm input costs. According to them, imported food inflation, which remains pressured by the naira depreciation, also rose by 145 bps to 40.96% y/y, up from 39.51% y/y in the previous month.
While noting that there were significant increases in the cost of diesel (+43.4%), kerosene (+54.8%), and PMS (+87.9%) due to subsidy removal and naira volatility, they projected that further inflationary pressures could stem from elevated food and energy prices. “Looking ahead, we expect to see an upward trend in November’s inflation reading, driven by higher food prices and elevated energy costs. Additionally, increased spending during the festive season is expected to exert significant pressure on consumer prices”, they said.