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•Say food demand-supply gap’ll remain wide
From Isaac Anumihe, Abuja and Chinwendu Obienyi
Economic analysts have predicted that Nigeria’s headline inflation could hit 22.35 per cent at the end of May 2023.
This is coming after the National Bureau of Statistics (NBS), revealed that the country’s headline inflation rose to a fresh 17-year high, increasing by 18 basis points (bps) to 22.22 per cent y/y in April as against 22.04 per cent recorded in March.
According to the analysts at Cordros Research, the price increases to the festive-induced demand and higher transport costs in the review period brought about the rise in inflation.
Accordingly, the breakdown provided showed that food prices rose further by 16bps to 24.61 per cent y/y while the core inflation (+28bps to 20.14 per cent y/y) remained at its highest level since May 2004 (23.43 per cent y/y). On a month-on-month basis, consumer prices by 5bps to 1.91 per cent (March: 1.86 per cent m/m) – the highest print since May 2016 (2.75 per cent m/m).
Unsurprisingly, food prices maintain their uptrend, rising by 6bps to 2.13 per cent m/m, tracking higher than the 2023 average (2.05 per cent m/m).
The analysts said they believe the increase witnessed in the review month reflects the combined effects of festive-induced demand given the Easter and Ramadan celebrations, and lingering passthrough effects of increased transport costs. Other factors that have been responsible for the sticky food prices include low supplies, exacerbated by the below-historical average cultivation activities and legacy infrastructure constraints.
Speaking on the outlook, the analysts, citing a report from Famine Early Warning Systems Network (FEWSNET), they said the month of May marks the start of planting season in the northern parts of the country, running concurrently with the off-season harvest of April to June.
“However, planting season started in April in the southern region and continues into May. Given the preceding, we expect the food demand-supply gap to remain wide, supporting high food prices. Against that backdrop, we look for a 2.15 per cent m/m increase in food inflation, translating to a year-on-year print of 24.78 per cent.
While pressures are currently subsiding in the core basket amidst lingering currency pressures, we believe the 2023 Fiscal Policy Measures and 2022 Finance Act introduce fresh risks to the core inflation over the short term. Accordingly, we forecast the core inflation to settle at 1.55 per cent m/m, with the favourable base effects from the prior year cascading to 19.75 per cent y/y.
Tying all together, we now look for a 1.89 per cent m/m headline inflation rate, cascading to a y/y print of 22.35 per cent in May”, they said.
