The Central Bank of Nigeria released its latest Inflation Expectations Survey for July 2024, which revealed that businesses in Nigeria are somewhat less pessimistic about current inflationary trends compared to households.
The survey, which gathered insights from 1,600 businesses and 1,650 households across the country, indicated that 83.7 per cent of respondents believed the current inflation level was high, with an overall index of -61.1 points.
Businesses, however, reported a slightly less negative perception with an index of -58.7 points, compared to households at -63.3 points.
Large businesses expressed greater concern, with an index of -70.8 points, though they anticipated a lower inflation rate in the near future compared to households.
The IES highlighted that both businesses and households expect inflation to rise further over the coming months, driven primarily by energy prices, exchange rates, and transportation costs.
The report noted, “The overall perception of inflation in July 2024 showed that 83.7 per cent of the respondents believed that the current level of inflation was high with an index of -61.1 points.”
This sentiment is echoed across different income groups, with those earning between N150,001 and N200,000 perceiving inflation as particularly high, with an index of -66.4 points, while those earning above N200,000 had a less negative index of -58.3 points.
In line with sentiments on inflation, respondents opined that their expenditure increased in the current month, as indicated by a positive index of 31.7 points although it is lower than June index.
Businesses expressed a significantly higher level of increased expenditure with an index of 47.1 compared to households that recorded 15.7 index points.
In July 2024, 74.2 percent of respondents believed that the CBN should decrease the interest rate.
In contrast, 12.4 percent thought the interest rate should be raised, while 13.4 percent preferred that the rates remain unchanged.
A further breakdown reveals that businesses anticipate lower inflation rate compared to households, with indices of -34.4 and -11.0 points for next month and next six months, respectively. However, for next month, households expect lower inflation with an index of 26.1 compared to businesses that recorded an index of -26.5.
Overall, both businesses and households believe that inflation rate will rise further in the review periods. Over the next six months, businesses expect their inflation outlook to be primarily driven by changes in energy prices at 92.8, exchange rates at 89.8, and transportation costs at 88.6 index points. Households also expect their inflation outlook to be primarily driven by energy prices at 88.1, transportation costs at 85.0, and exchange rates at 82.7 index points.
These factors consistently remain the top concerns influencing inflation expectations for households.
Energy costs were identified as the top driver of inflation, increasing from 90.6 points in June to 91.8 points in July.
