Experts have mixed expectations regarding February’s inflation rate, with some predicting a slight moderation or stability, while others foresee a marginal increase.
However, no sharp decline is expected.
While some experts anticipate a decline in the month-on-month (m/m) inflation rate, there is, however, no clear consensus on the year-on-year (y/y) outlook.
The year-on-year inflation rate remains uncertain due to factors such as fuel price reductions, foreign exchange stability, and the impact of food supply shortages during the fasting period.
Although analysts point to the recently rebased Consumer Price Index (CPI) as a source of uncertainty in inflation projections, concerns have been raised regarding the methodology used by the Nigeria Bureau of Statistics (NBS) to determine the rebased CPI, further complicating precise estimates.
The Managing Director of Arthur Steven Asset Management Asset, Mr Olarunde Amolegbe, noted that, “My expectation is that Inflation is probably going to come in flat or show a slight increase. Though we saw a reduction in fuel prices last month, this does not appear to have an impact on the shelf price of other items. There was also an improvement in FX stability and prices, all it did was slow the rate of inflation rather than cause it to drop.”
“Although 70% of our modelled scenarios suggests that y/y reading too should decline below 24.7% recorded in January in a base case, lack of clarity on how NBS arrived at the rebased CPIs for January 2024 (88.9, 87.5, and 90.4 for all items, food, and core inflation index sequentially) without any indication of what the rebased indices for the rest of the months are (February to November), clouds precise estimation of the base period. Hence, precision on the y/y reading is challenging.
“As per our expectation for the m/m, the reading is anchored on mixed price movements in the month – PMS price fell but limited supplies of some food items ahead of fasting (especially grains like beans) – pressured prices higher.”
The government has committed to increasing food production and supply. During the month, the Minister of Information and National Orientation, Mohammed Idris, stated that the Federal Government is commited to lowering the cost of food commodities through massive investments in agricultural production rather than taking control measures.
By the month’s end, the naira appreciated against major currencies as reported by Naijaonpoint, strengthening to N1,540/$ from N1,620/$ (7.41% appreciation), N1,910/£ from N2,000/£ (4.50% gain), and N1,550/€ from N1,660/€ (6.34% gain).
Prices of essential food items are decreasing in the market, also prices of imported food items are dropping due to naira stability.
However, shortage in food supply may drive prices up again.