Nigeria’s inflation seen nearing 15% on petrol price, power tariff
The recent hikes in petrol price and electricity tariff will push Nigeria’s inflation to 14.8 percent in November from 14.23 percent a month ago, the Financial Derivatives Company Limited has said.
“If this happens, it means that inflation will rise for the 15th consecutive month. Food inflation is projected to rise to 17.5 percent, core to 11.3 percent and month-on-month to 1.5 percent,” Analysts at FDC, led by Mr Bismarck Rewane, said in their latest economic bulletin.
They noted that the consumer price index had steadily increased since September 2019, largely due to money supply saturation, supply-side challenges and cost push factors.
According to them, the closure of the land borders, heightened insecurity in the food-producing states and slow disbursement of foreign exchange and rationing limited commodities supply.
The analysts said this combined with money supply growth (3.53 percent), supply chain disruptions, higher logistics costs and electricity tariff hike exacerbated inflationary pressures.
More so, November is the first month in which the impact of the increase in the price of PMS and a partial rise in electricity tariffs will feed into the inflation basket,” they said.
The FDC noted that the Federal Government announced this week a N5 per litre reduction in the pump price of petrol effective December 14.
It said, “Although, this could slightly ease pressures on consumers’ disposable income, it is highly unlikely that transporters will reduce their fares as a result of the price fall.
“It also raises fundamental concerns about the deregulation of the downstream petroleum industry, especially at a time when global oil prices are rising.”
The analysts said since the liberalisation of the downstream oil and gas sector, petrol price had increased by over 30 percent to N170 per litre.
They noted that the CBN had intensified efforts towards achieving price and exchange rate stability through increased forex supply and introduction of special bills.
According to them, an increase in forex supply will have a positive impact on output.
“The special bills, which qualify as liquid assets on banks’ balance sheets, will serve as a ‘replacement for cash’ for 90-days. This will help mop up market liquidity, push up interest rates and taper inflationary pressures,” the analysts added.
