Russia/Ukraine war may reverse inflation gains – Rewane

A survey of commodities prices in Lagos shows there might be a marginal decline in inflation figures in March to 15.57 per cent, warning that the spiral effect of the Ukraine and Russian war may result in imported inflation that will send inflation rate northwards.

The National Bureau for Statistics (NBS) is scheduled to publish the headline inflation for February and related data on Tuesday, March 15.

“Our time series model and survey of commodity markets in the Lagos Metropolis indicates that there will be another marginal decline in official headline inflation to 15.57 per cent and core inflation will increase to 13.98 per cent”, said Bismarck Rewane, Chief Operating Officer (COO) of Financial Derivatives Company (FDC) Limited.

In a recent publication by FDC, the survey was carried out at the end of February, which was the beginning of the petrol scarcity and adulterated fuel scandal. Therefore, the impact of the spike in the black-market price of petrol and the skyrocketing of diesel price had not manifested in retail prices.

“That said, we expect core and imported inflation to start creeping upwards due to the impact of the Ukraine-Russian conflict on both international and domestic prices.

The global food price index touched an all-time high of 140.7 points in February, with wheat and corn prices touching a peak of $12.94/bushel and $7.51/bushel respectively”, said FDC.

Headline inflation will most likely reverse its downward trend in March due to supply-side constraints and cost pressures, particularly the knock-on effect of the spike in diesel prices (retail price currently at N650/litre). This will be a major consideration at the MPC meeting later this month. The risk of a possible reversal in the current inflation trend could prompt an increase in interest rates.