The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), analysts are certain will increase the benchmark rate, otherwise known as the Monetary Policy Rate (MPR) when it meets next in November. This is because, survey by analysts indicates that inflation which has declined six consecutive times will look up north September.
Since March 2021, Nigeria’s inflation rate has been declining monthly as the Central Bank of Nigeria (CBN) projected it may drop to 13 percent this year and a single-digit rate by 2022.
“Based on our recent survey of the Lagos commodity markets and time series model, Nigeria’s headline inflation is projected to buck its six months declining trend in September, rising to 17.2 per cent from 17.01 per cent in August, said Bismarck Rewane, Chief Operating Officer (COO) of Financial Derivatives Company (FDC) Limited.
A recent report by FDC’s analysis also shows that both the food and non-food baskets are likely to increase in September, largely due to exchange rate pressures.
Since the Bureau de Changes (BDCs) were shut out of the official market in July 2021, the naira has lost 15.08 per cent at the parallel market.
Manufacturers claim they were only able to source about five to 10 per cent of their foreign exchange (forex) needs from the official window.
“This led to a 18.6 per cent depreciation in the blended rate to N571.65/$ from N482/$ in June, pushing up the cost of importing raw materials and machinery. The price of flour and pasta have increased by 44.83 per cent and 40.0 per cent to N21,000/bag and N6,300 respectively”, said FDC.
Also, the price of gas surged by 114.29 per cent to over N7,500 (12.5kg), forcing consumers to switch to alternative energy sources such as firewood and charcoal (cross elasticity of demand).
“We expect the September and October inflation reports to be released before the MPC meeting in November. The committee will be mindful and watch the inflation trend closely. If the spike in inflation is sustained, the committee would be more hawkish in its monetary policy stance”, said Rewane.
