By Demi Adeniyi
The Economic Intelligence Unit of Access Bank Plc on Friday said the Nigeria Consumer Price Index (CPI) reached 32.70% year on year in September, a rise from 32.15% in August, marking a departure from two consecutive months of disinflation.
According to the report, this inflationary spike reported by the National Bureau of Statistics (NBS), reflects intensifying cost pressures across various sectors, primarily fueled by a depreciating exchange rate, heightened fuel prices, and escalating transportation costs, which are collectively burdening consumers and businesses alike.
The month-on-month inflation rate also climbed to 2.52% in September, up from 2.22% in August, driven by the compounding effects of these economic challenges.
Food inflation, which significantly impacts Nigeria’s overall inflation due to the weight of food prices in household expenditures, rose sharply to 37.77% in September from 37.52% in August.
Key factors responsible for the spike in the prices of food items include flash floods that severely disrupt production in major food-producing regions, effectively erasing typical seasonal price relief that accompanies the harvest. The combined impact of weather-induced agricultural shortfalls, elevated insecurity in farming areas, and deteriorating infrastructure has led to shortages of staple foods like maize, beans, and rice, pushing prices even higher.
Furthermore, recent fuel price hikes have increased logistics costs, adding to food price inflation and creating additional strain on household budgets.
Conversely, core inflation – which excludes volatile items like food and energy – showed a slight decrease, easing to 27.43% in September from 27.58% in August. This marginal decline is partially attributed to base effects from high inflation levels in the previous year, which render current levels comparatively lower.
Additionally, the Central Bank of Nigeria’s (CBN) ongoing monetary policy interventions, aimed at tightening liquidity and containing inflation expectations, have likely contributed to decline in core inflation.
In response to intensifying inflationary pressures, the Central Bank of Nigeria (CBN) adopted a more assertive monetary policy stance in September 2024, raising the Monetary Policy Rate (MPR) to 27.25%. This proactive measure, decided by the Monetary Policy Committee, aims to counteract inflationary risks exacerbated by the depreciation of the Naira depreciation and rising fuel prices, with the intent to stabilize consumer prices and mitigate further inflation escalation. Despite these efforts, inflationary pressures are expected to persist.
Our forecast indicates that the headline inflation rate is expected to marginally increase year-on-year to 33.10% in October 2024 – an increase of 0.40 percentage points from the 32.70% recorded in September 2024. This forecast is based on an autoregressive model that incorporates lags of the composite Consumer Price Index (CPI) and inflation expectations, using the same product
definitions applied by the National Bureau of Statistics (NBS).
“We anticipate the CPI to reach approximately 820.6 points by October 2024, representing an increase of about 16.5 points from September’s level, signifying ongoing inflationary pressures despite the central bank’s efforts”, the report said.
Further compounding these pressures, the recent increase in petrol prices – following the Nigerian National Petroleum Corporation’s (NNPC) adjustment of Premium Motor Spirit (PMS) prices from ₦855-₦897 per liter to over ₦1,000 per liter – is expected to have a broad-based impact. This price surge is likely to drive up transportation and production costs, triggering a ripple effect on the cost of goods and services across sectors, intensifying the burden on consumers and amplifying the inflationary outlook for October.
Anticipating market movements: Insights into probable market points
Despite Nigeria’s ongoing economic challenges, investor appetite for the country’s fixed income instruments remains strong.
The Central Bank of Nigeria (CBN) conducted a Treasury Bills (T-Bills) Primary Market Auction (PMA) on October 9th, 2024 and offered N81.09 billion across three instruments. The offer size pushed the subscription-to-offer ratio up to 3.34x, reflecting investor preference amid tight liquidity.
The CBN’s Open Market Operations (OMO) in recent months have been marked by strong demand and strategic adjustments aimed at managing liquidity and interest rates, with an emphasis on supporting the financial system and addressing macroeconomic challenges.
Additionally, the CBN’s tight monetary policy has played a key role in controlling inflation and making Nigerian securities more attractive. By raising interest rates on treasury bills, the apex bank seeks to reduce excess liquidity by making borrowing more costly, while also encouraging foreign capital inflows. These efforts have contributed to a rise in Nigeria’s foreign exchange reserves, which reached $39.83 billion as of November 1, 2024, up from $33.02 billion at the beginning of the year. This increase in reserves highlights the success of the CBN’s policies in stabilizing the economy and boosting investor confidence in Nigerian financial markets.
In a decisive move to address rising food costs and ease inflationary pressures on Nigerians, the Federal Government has introduced a temporary zero-duty policy on certain food imports. This policy seeks to enhance food availability, lower prices, and offer immediate relief to the public. By temporarily removing import duties on critical food items and supporting the growth of domestic agriculture, the government is adopting a comprehensive approach to promote food security and reduce inflation.
Complementing these efforts, the Central Bank of Nigeria (CBN) has entered into a strategic partnership with the International Finance Corporation (IFC) to promote local currency financing. This collaboration aims to reduce Nigeria’s reliance on foreign debt, thereby mitigating the risks of exchange rate volatility that often lead to inflationary pressure.
By fostering a more resilient financial environment, this initiative seeks to lower external vulnerabilities and contribute to sustainable economic growth, ultimately helping to moderate inflationary pressures in the long term.
The Economic Intelligence Unit of Access Bank Plc on Friday said the Nigeria Consumer Price Index (CPI) reached 32.70% year on year in September, a rise from 32.15% in August, marking a departure from two consecutive months of disinflation.
According to the report, this inflationary spike reported by the National Bureau of Statistics (NBS), reflects intensifying cost pressures across various sectors, primarily fueled by a depreciating exchange rate, heightened fuel prices, and escalating transportation costs, which are collectively burdening consumers and businesses alike.
The month-on-month inflation rate also climbed to 2.52% in September, up from 2.22% in August, driven by the compounding effects of these economic challenges.
Food inflation, which significantly impacts Nigeria’s overall inflation due to the weight of food prices in household expenditures, rose sharply to 37.77% in September from 37.52% in August.
Key factors responsible for the spike in the prices of food items include flash floods that severely disrupt production in major food-producing regions, effectively erasing typical seasonal price relief that accompanies the harvest. The combined impact of weather-induced agricultural shortfalls, elevated insecurity in farming areas, and deteriorating infrastructure has led to shortages of staple foods like maize, beans, and rice, pushing prices even higher.
Furthermore, recent fuel price hikes have increased logistics costs, adding to food price inflation and creating additional strain on household budgets.
Conversely, core inflation – which excludes volatile items like food and energy – showed a slight decrease, easing to 27.43% in September from 27.58% in August. This marginal decline is partially attributed to base effects from high inflation levels in the previous year, which render current levels comparatively lower.
Additionally, the Central Bank of Nigeria’s (CBN) ongoing monetary policy interventions, aimed at tightening liquidity and containing inflation expectations, have likely contributed to decline in core inflation.
In response to intensifying inflationary pressures, the Central Bank of Nigeria (CBN) adopted a more assertive monetary policy stance in September 2024, raising the Monetary Policy Rate (MPR) to 27.25%. This proactive measure, decided by the Monetary Policy Committee, aims to counteract inflationary risks exacerbated by the depreciation of the Naira depreciation and rising fuel prices, with the intent to stabilize consumer prices and mitigate further inflation escalation. Despite these efforts, inflationary pressures are expected to persist.
Our forecast indicates that the headline inflation rate is expected to marginally increase year-on-year to 33.10% in October 2024 – an increase of 0.40 percentage points from the 32.70% recorded in September 2024. This forecast is based on an autoregressive model that incorporates lags of the composite Consumer Price Index (CPI) and inflation expectations, using the same product
definitions applied by the National Bureau of Statistics (NBS).
“We anticipate the CPI to reach approximately 820.6 points by October 2024, representing an increase of about 16.5 points from September’s level, signifying ongoing inflationary pressures despite the central bank’s efforts”, the report said.
Further compounding these pressures, the recent increase in petrol prices – following the Nigerian National Petroleum Corporation’s (NNPC) adjustment of Premium Motor Spirit (PMS) prices from ₦855-₦897 per liter to over ₦1,000 per liter – is expected to have a broad-based impact. This price surge is likely to drive up transportation and production costs, triggering a ripple effect on the cost of goods and services across sectors, intensifying the burden on consumers and amplifying the inflationary outlook for October.
Anticipating market movements: Insights into probable market points
Despite Nigeria’s ongoing economic challenges, investor appetite for the country’s fixed income instruments remains strong.
The Central Bank of Nigeria (CBN) conducted a Treasury Bills (T-Bills) Primary Market Auction (PMA) on October 9th, 2024 and offered N81.09 billion across three instruments. The offer size pushed the subscription-to-offer ratio up to 3.34x, reflecting investor preference amid tight liquidity.
The CBN’s Open Market Operations (OMO) in recent months have been marked by strong demand and strategic adjustments aimed at managing liquidity and interest rates, with an emphasis on supporting the financial system and addressing macroeconomic challenges.
Additionally, the CBN’s tight monetary policy has played a key role in controlling inflation and making Nigerian securities more attractive. By raising interest rates on treasury bills, the apex bank seeks to reduce excess liquidity by making borrowing more costly, while also encouraging foreign capital inflows. These efforts have contributed to a rise in Nigeria’s foreign exchange reserves, which reached $39.83 billion as of November 1, 2024, up from $33.02 billion at the beginning of the year. This increase in reserves highlights the success of the CBN’s policies in stabilizing the economy and boosting investor confidence in Nigerian financial markets.
In a decisive move to address rising food costs and ease inflationary pressures on Nigerians, the Federal Government has introduced a temporary zero-duty policy on certain food imports. This policy seeks to enhance food availability, lower prices, and offer immediate relief to the public. By temporarily removing import duties on critical food items and supporting the growth of domestic agriculture, the government is adopting a comprehensive approach to promote food security and reduce inflation.
Complementing these efforts, the Central Bank of Nigeria (CBN) has entered into a strategic partnership with the International Finance Corporation (IFC) to promote local currency financing. This collaboration aims to reduce Nigeria’s reliance on foreign debt, thereby mitigating the risks of exchange rate volatility that often lead to inflationary pressure.
By fostering a more resilient financial environment, this initiative seeks to lower external vulnerabilities and contribute to sustainable economic growth, ultimately helping to moderate inflationary pressures in the long term.