BY BAMIDELE FAMOOFO
Based on market survey in Lagos and its econometric model, Financial Derivatives Company Limited, has predicted a further increase in Nigeria’s headline inflation to 21.35 percent in November 2022, from 21.09 percent in October 2022.
Food inflation is expected to rise to 23.42 percent year-on-year in November, a decline from 23.72 percent in October.
The National Bureau of Statistics will release its November inflation report on December 15.
“While this may seem like food price increases are beginning to ease, it is important to note that food inflation is still very much present. The decline in inflation was due to the harvest period and consumer resistance as prices of staple goods such as rice, beans, and garri fell in the month of November,” FDC stated in the December edition of its economic bulletin.
According to the Bismarck Rewane’s Company, “On a month-on-month basis, inflation is expected to decline further to 1.1 percent from 1.24 percent in October. Meanwhile, core inflation is projected to increase by 0.12 percent to 17.92 percent in November.”
Inflationary pressures in the country have remained elevated largely due to the exchange rate pass-through effect. Naira’s exchange rate against the dollar at the parallel market averaged N795.95 in November, a 5.59 percent depreciation from N751.47 in October. Due to the lag effect, we expect to see the impact of the current fuel scarcity situation on inflation increase in December.
However, rising commodity prices and stubbornly high inflation is not Nigeria-specific. According to the EIU’s latest Worldwide Cost of Living (WCOL) survey, prices in the world’s largest cities increased by an average of 8.1 percent in local currency terms over the past year. This is the fastest rate in over 20 years, highlighting the impact of the war in Ukraine and the continued COVID-19 restrictions in China. The most rapid increases in the WCOL index were for the price of a litre of petrol which has risen by an average of 22 percent on a year-on-year basis in local currency terms. Food inflation and household goods prices also rose over the year, while prices of recreational goods and services were subdued, reflecting the focus of consumer spending on essential goods. Singapore and New York topped the EIU ranks in the WCOL survey.
Although major inflationary pressures stemmed from the aftermath of the Russia/Ukraine war, global prices had been on the rise due to supply chain disruptions arising from the COVID-19 pandemic in 2020. Price pressures are however set to ease in 2023 compared to 2022 as higher interest rates dampen demand pressure and China’s supply chain blockage starts to ease.
According to the IMF, global inflation is expected to decline to 6.5 percent in 2023, from 9.4 percent in 2022. About 90 percent of the total food supply in Nigeria is produced in rural areas, and while prices of food at the farm gates are usually low, there is a steep price increase when it reaches the urban areas. This is due to supply chain constraints such as poor road infrastructure and higher logistics costs. 87 percent of rural roads all over Nigeria are in bad condition, while the amount of farm-produce storage facilities is inadequate. This increases the risks of post-harvest losses. In Nigeria, the annual loss of tomatoes is between 45-60 percent of total output.
