As the National Bureau of Statistics (NBS) prepares to release its latest inflation report this weekend, analysts at Lagos-based Cordros Research have forecast a decrease in the inflation rate to 32.24 per cent for August.
This projection comes despite the severe fuel shortages and sharp price hikes that have characterized the past two months. In their report released on September 10, the Cordros Research team also predicted that inflation would rise slightly in September to 32.33 per cent and then edge up to 32.57 per cent in October, before tapering off to 32.09 per cent by the end of the year.
The NBS’s most recent inflation report showed a reduction in the inflation rate to 33.4 per cent in August, down from 34.19 per cent in June, despite the escalating fuel prices and their significant impact on transportation costs.
This anticipated decline in inflation, despite ongoing fuel price hikes and scarcity, has sparked curiosity among economic observers.
The analysts noted that the strong correlation between Premium Motor Spirit (PMS) prices, transportation costs, and core inflation rates underscores the widespread impact of rising fuel prices.
“We anticipate that the increase in energy and transportation costs, which make up 21.0 per cent and 13.0 per cent of core items, respectively, will drive core inflation higher,” they stated.
They further explained that the tight link between transportation costs and food inflation suggests a notable pass-through effect on food prices.
While the main harvest season, which begins in mid-September, is expected to slow the rise in food prices, the increase in logistics costs could temper the pace of this decline.
“Overall, we still project a moderation in headline inflation for August to 32.24 per cent year-on-year (from 33.40% in July) due to the high base effect from August 2023.
“However, we expect inflation to increase in September (to 32.33%) and October (to 32.57%) before declining to 32.09% by year-end. “Consequently, we have revised our average headline inflation projection upwards to 32.64 per cent for 2024, up from our previous estimate of 31.47 per cent,” the analysts wrote in their report titled ‘Higher PMS Prices to Exacerbate Inflationary Pressures.’
The report follows the Nigerian National Petroleum Company Limited’s (NNPCL) recent increase in the base pump price of PMS by 47.4 per cent, raising it to N855.00 per litre on September 3, up from N568.00 per litre.
This adjustment came after a period of acute fuel scarcity and NNPCL’s acknowledgment of significant debts owed to international oil traders, which had constrained fuel supply.
“Given the strong correlation between fuel costs and transportation expenses, coupled with its broad impact on the consumer price index, we foresee a further increase in inflationary pressures in the near term,” the analysts stated.
They added that their revised inflation projection of 32.64 per cent for 2024 is still below the extreme inflationary pressures currently experienced by Nigerians across all sectors of the economy.
Commenting on the previous July inflation report and the Gross Domestic Product (GDP) growth report released by the NBS, Mr. David Adonri, CEO of Highcap Securities Limited, criticised both reports as not reflecting the realities on the ground.
He urged the NBS leadership to conduct a more thorough investigation into the day-to-day price increases across commodities, goods, and services, as well as the precarious state of the econo – my, in order to produce more accurate findings.
