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Analysts at Financial Derivatives Company (FDC) have said that the significant increase in Nigeria’s inflation in October, “suggests that inflation is becoming intractable and is unlikely to reach an inflection point anytime soon.”
The analysts stated this while commenting on the inflation report for October 2024 recently released by the National Bureau of Statistics (NBS).
With the NBs data showing that headline inflation jumped to 33.88 per cent, which is a 1.18 percent point above September’s figure of 32.70 per cent, the analysts noted that the numbers reveal, “a further buildup in inflationary pressures.”
They stated: “The rate of increase was far higher than analysts’ expectations. Average rate of inflation in Q2 was 33.95 per cent and 32.75 per cent so far in Q3, with the slow pace one could think inflation is reaching a point of inflection in near term.
“However, the significant hike of 1.18 per cent in October inflation suggests that inflation is becoming intractable and is unlikely to reach an inflection point anytime soon.”
The analysts further said: “A decomposition of the inflation basket shows that the weak naira, petrol price, logistics costs, are major contributory factors that gave inflation some momentum.
“Both the food and non-food baskets recorded price increases. Food inflation, which remains the usual suspect, spiked by 1.39 per cent to 39.16 per cent.
In spite of the harvest, the weak naira, logistics costs (which was heightened by petrol price), had its toll on commodity prices.
“Also, core inflation, which excludes the more volatile food and energy costs and is considered a better indicator of price growth trends rose to 28.37 per cent from 27.43 per cent in September.”
They noted that the upward trend in inflation despite the Central Bank of Nigeria’s (CBN) monetary tightening, “implies that inflation is driven by output constraints rather than money supply saturation.”
“Hence, October’s data sets the stage for a pivotal policy response. More likely than not, CBN is expected to increase interest rates again,” the analysts added.
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