FDC forecasts 17.8% inflation rate for March

Nigeria’s headline inflation rate, which rose to 17.8 per cent in March from 17.2 per cent in February 2021, is expected to continue its upward trend in Q2’21, analysts at Financial Derivatives Company (FDC) have said.


The analysts, who made the prediction in a report obtained by New Telegraph yesterday, noted that if their forecast for March    comes to pass, it would be the 19th consecutive month that the rate has headed north.


They stated: “The Nigerian Bureau of Statistics (NBS) will release the inflation figures for the month of March on April 15. Our time series model is forecasting a 0.47 per cent jump in headline inflation to 17.8 per cent. This will be the 19th consecutive monthly increase and a 48-month high.


“Exchange rate pressures have proven to be one of the principal inflation drivers in Nigeria. Manufacturers are currently experiencing difficulties in securing imported raw materials as forex rationing continues to take its toll.


“Our analysis reveals that both the food and core sub-indi-  ces are likely to increase in the month of March. Food inflation is projected to rise to 22.3 per cent, while core sub-index could climb to 12.6 per cent. Notably, rising food inflation is not a Nigeria-specific phenomenon. “According to Food and Agriculture Organisation, the Global Food Price Index rose by 2.1 per cent to 118.5pts in March.


This was driven by strong demand for basic food stuffs such as vegetable oils, meat and dairy.” The analysts said the sharp increase in headline inflation was likely to push the Central Bank of Nigeria (CBN) into reconsidering resuming its tightening cycle.


As they put it, “with inflation spiralling and currently double the upper band of the CBN’s inflation target (9%), a likely increase in interest rates is not only imminent but almost inevitable. The good news is that policy makers are becoming increasingly aware of the need to increase interest rates before inflation spirals out of control.

“A third of the committee members voted for a rate hike at the Monetary Policy Committee (MPC) meeting in March. This is likely to increase towards a majority of members in the month of May.”


Following NBS’ release of February 2021 Consumer Price Index (CPI) report on March 16, which showed that inflation rose to a four-year peak of 17.33 per cent, New Telegraph had reported financial analysts as saying that they expect prices to continue to rise in the foreseeable future.


For instance, commenting on the NBS report, MD/CEO at BIC Consultancy Services, Dr. Boniface Chizea, predicted that inflation was likely to maintain its upward trajectory for the foreseeable future.


He said: “There is so much liquidity being injected into the economy by way of palliatives, which really is quantitative easing. But I understand that returns on fixed income securities are gradually increasing.


“If that continues, it would imply that the authorities are now also attempting to mop up excess liquidity to maintain stable macro economy.


That should be one sure measure to cage inflationary spiral.” Similarly, a former President of the Association of National Accountants of Nigeria (ANAN), Dr. Sam Nzekwe, said that inflation would maintain its upward trend if sectors, such as agriculture and manufacturing continue to grapple with the kind of challenges they are facing currently.


He said: “The country is not producing enough. Agriculture, which was the one of the key sectors responsible for Nigeria’s exit from recession, is facing so many challenges. Farmers are not able to go their farms because of the security crisis in the country.


“Manufacturers are struggling with poor infrastructure as well as foreign exchange issues because as long as the naira continues to weaken against the dollar, prices will keep rising.




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