Nigeria’s inflation seen jumping to 34.25% on petrol scarcity

With the return of petrol scarcity in several parts of Nigeria last month, the inflation rate is expected to accelerate to 34.25 percent from 33.20 percent in March, analysts at Financial Derivatives Company Limited (FDC) have said.

“Nigeria’s inflation, a significant indicator, has remained stubbornly high, with no clear sign of abating any time soon,” the Lagos-based economic research firm said in a note.

Food inflation is expected to rise to 40.98 percent from 40.01 percent in March, while core inflation would decline to 25.28 percent from 25.90 percent, according to FDC.

“The current interest rate regime has indeed lured in more investors eyeing attractive yields in fixed-income instruments. This influx of hot money could temporarily bolster liquidity and investment sentiment,” the analysts said. “However, the broader implications of sustaining a high-interest rate environment warrant scrutiny.”

They said while fixed-income investments may flourish, the high interest rates pose challenges for private investors seeking credit for business expansion.

They added: “This crucial aspect directly impacts productivity growth, as businesses face higher borrowing costs, potentially stifling investment and innovation. Moreover, the looming trade-off becomes evident during inflationary periods, where the burden of servicing high-interest debt exacerbates economic shocks.

“It becomes paramount to weigh the consequences of persisting with elevated interest rates to prevent the economy from overheating and mitigate the risk of raising poverty lines and shrinking productivity.”

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