BY BAMIDELE FAMOOFO
Nigeria’s headline inflation is projected to increase again by 0.55 percent to 21.32 percent in October; this is according to a market survey conducted by Financial Derivatives Company Limited.
FDC hinted that Food inflation will rise by 0.62 percent to 23.95 percent, while core inflation will increase by 0.18 percent to 20.5 percent. If our estimates are accurate, it will be the ninth consecutive monthly increase and the highest rate of inflation in 17 years.
“In contrast to the general expectation that harvest would drive down market prices, the food basket experienced a faster rate of price acceleration. This can be attributed to the significant shortage in the supply of agricultural products as a result of the floods that ravaged major food-producing states. Furthermore, the interaction of higher logistic costs and the exchange rate pass-through effect is keeping the price of the non-food basket above reach. The naira has lost over 15% of its value relative to the dollar in the last one month. Energy prices, including diesel and gasoline, have remained elevated, with diesel price hovering between N790 and N850 in the past month,” the report noted.
Moreso, FDC expect month-on-month inflation to increase by 0.8 percent to 2.16 percent as the effect of floods outweighs the benefit of the typical harvest season in the month of October.
The impact of the floods that swept more than 26 states under water will continue to undermine the positive impact of the harvest period. Typically, Nigerian headline inflation and food inflation taper from September to November every year, reflecting the core harvests that occur in the period. However, the recent floods in the major food-producing states will rob the country of the price moderation effects of the harvest season. This, coupled with higher logistics costs that have been exacerbated by the resurfaced fuel scarcity in the major cities will keep food inflation elevated in the coming months. Food inflation has maintained an upward trend since January. It has increased by 6.21 percent in the last ten months.