Recent economic data and intelligence reports indicate a potential uptick in inflation for the month of March, according to surveys conducted by leading economic and finance firms.
The combined impact of monetary and fiscal policies has contributed to a significant slowdown in the previous rapid increase in the cost of living.
However, residual pressures from past trends are expected to keep prices somewhat elevated in the near term.
The National Bureau of Statistics (NBS) is set to release the official inflation rate for March, with forecasts suggesting a potential increase of 40 to 50 basis points. This contrasts with the sharper increases seen in January and February, where inflation rose by 180 and 98 basis points, respectively.
Despite a general decline in food prices, particularly noticeable in imported commodities, independent surveys highlight a marginal rise in inflation, primarily attributed to increased consumer demand during festive periods like Easter and Ramadan.
Additionally, supply shortages stemming from the planting season have contributed to this trend.
According to the Financial Derivatives Company (FDC), while both food and core inflation are anticipated to show a slight increase, month-on-month trends are expected to reveal a decline. The FDC’s Managing Director, Bismarck Rewane, noted that the Central Bank of Nigeria’s tightening stance has helped temper the inflation rate, although challenges remain.
Analysts project a potential inflection point in inflation trends, with expectations that both core and food inflation will taper in the latter half of 2024. However, factors such as anticipated wage reviews could reignite inflationary pressures.
The recent appreciation of the naira against the dollar has positively impacted inflation trends, with some food items experiencing price declines. The sustained appreciation is attributed to the Central Bank’s efforts in the foreign exchange market.
Looking ahead, experts emphasise the need for coordinated efforts between fiscal and monetary authorities to address non-monetary drivers of inflation. Initiatives such as the dry-season farming programme are seen as positive steps to increase agricultural productivity. However, challenges such as infrastructure deficits, insecurity, and high energy costs need to be urgently addressed.
In tackling inflation, experts recommend sustained reforms in the forex market to stabilise the exchange rate, as well as structural interventions to boost productivity and competitiveness. Addressing high transportation and logistics costs, reducing fiscal deficit monetization, and managing climate change consequences are also identified as crucial policy measures. Additionally, creating an investment-friendly tax environment and reducing import duties on raw materials are suggested to stimulate investments and output in the economy.
