Ahead of the release of October 2023 inflation figures on Tuesday, November 14, by the NBS, analysts at Afrinvest West Africa are forecasting a further hike in Nigeria’s headline inflation rate to 27.9% for October 2023.
This is according to the company’s October 2023 Inflation Forecast as obtained by Nairametrics. After recording a 16-year high CPI of 26.72% in September 2023, the company predicts a further 102 bps spike for Nigeria in October 2023. The spike is linked to the depreciation of the FX rate at both the official and unofficial markets.
Just like other months where food has been the major contributor to the CPI hike, the trend is projected to continue in October due to increased transportation costs for agricultural produce.
However, the report suggests that there was a boost in food supply in October due to the ongoing harvest season.
The report also highlights that the rising price of Petroleum Motor Spirit (PMS) and Diesel (AGO) in October 2023 is a significant contributor to core inflation in the month.
Highlights of the report
Some key solutions were highlighted in the report, including taming the growth of the money supply. It was noted that the money supply grew year-on-year by 40.3% in September 2023 as against actual economic growth of 2.5% within the same period.
The report also noted,
- “Fiscal spending must be more tilted towards value-creating capital spending as against consumption-focused recurrent needs.”
One of the solutions highlighted in the report is the ease of restrictions on food imports.
According to the report, a short-term solution to fixing food supply issues is to reduce tariffs on food imports, while a long-term solution is to address structural issues such as security, transportation, and logistics.
On the equities market, the report noted that since the NGX outperformed the inflation rate from the start of the year till October, it was highly unlikely that negative inflation sentiment would affect the market’s positive sentiment.