By Elizabeth Adegbesan
Investment analysts have predicted that headline inflation rate will rise above 23 percent on account of recent government policies including removal of fuel subsidy and naira depreciation in the forex market.
Meanwhile, the National Bureau of Statistics, NBS, Consumer Price Index, CPI, report for May, 2023, shows headline inflation rose year-on-year by 0.19 percentage point to 22.41 percent in May from 22.22 percent in April.
This is the highest inflation rate recordedinNigeriasinceSeptember 2005 and the third straight month of staying within the 22 percent band.
Recall that the federal government recently removed fuel subsidy resulting in over a hundred percent rise in the pump price per litre while the Central Bank of Nigeria, CBN, two days ago, floated the foreign exchange rate, resulting in 40% depreciation of the local currency, the Naira, to N664.04/$ in the official market.
The NBS report stated: “In May 2023, the headline inflation rate increased to 22.41 percent relative to April 2023 headline inflation rate which was 22.22 percent.
“Looking at the movement, the May 2023 inflation rate showed an increase of 0.19 percent points when compared to April 2023 headline inflation rate.”
The Bureau also said that food inflation rose to 24.82 percent in May from 24.61 percent in April due to increases in prices of oil and fat, yam and other tubers, bread and cereals, fish, potatoes, fruits, meat, vegetable, and spirit.
Commenting on the development, Cowry Asset Management Plc, in its inflation update report for May, said: “Over time, the Nigerian government, through the monetary authority, has taken several measures to tame inflation, including raising interest rates, devaluing the naira, and subsidising the prices of some essential goods.
“However, these measures have proved abortive and unsuccessful in bringing inflation under control.
“Notwithstanding these efforts, the new administration has hinted at the need for interest rate moderation in a bid to increase investment and consumer purchasing power.
“We note that this move will bring about a further spike in the rate of inflation.
“Also, CBN’srecentdecisionto float the naira will bring about further depreciation of the naira, while we expect to see the effect of the current subsidy removal by the new administration on price pressure and economic activities.
“The resultant effect of this decision will be more expensive imports and upward inflation pressure.
“Meanwhile, we expect a further surge in the headline inflation index to 23.6 percent in June.”
In their Economic Bulletin for June, analysts at Financial Derivative Company, FDC, said:
“The full impact of the petrol price adjustment will be felt in the inflation numbers for June, which initial estimate is put at 25.2 percent.
“However, the price of diesel, which is the major fuel used by trucks for logistics, declined by 12.70 percent to N660/ltr in June from its peak of N756/ltr in May. This is expected to mildly ease inflation pressures. Another interest rate hike may be imminent.”
https://www.vanguardngr.com/2023/06/inflation-hits-18yr-high-at-22-4-to-surpass-23-this-month/
