The ongoing surge in prices of goods and services, coupled with the naira’s further depreciation, is projected to push inflation above 34 percent in May 2024, marginally higher than April’s figure of 33.69 percent.
This follows efforts by the Central Bank of Nigeria (CBN) to curb the ongoing inflationary trend through monetary policy tightening, including raising its Monetary Policy Rate (MPR) to 24.75 percent last month.
According to Vanguard, Nigeria’s top investment firms anticipate the release of May’s inflation data this weekend.
They observe that the factors driving inflation in Nigeria, such as the increase in money supply, which rose by 3.98% to N96.97 trillion in April, are still prevalent in the system.
The investment firms include Financial Derivatives Company Limited, Afrinvest Securities Limited, Vetiva Capital Management Limited, Cowry Assets Management Limited, and CardinalStone Partners Limited.
The FDC projected a further rise in the inflation rate to 34.32 percent in May, while Vetiva Capital projected a further rise to 34.28 percent.
Additionally, Afrinvest projected 34.3 percent, while CardinalStone and Cowry Assets projected 34 percent.
According to FDC, “Based on our regression model from our Lagos market survey, headline inflation is expected to increase by 0.63% to 34.32% from 33.69% in April. If our forecast is accurate, it will be the fifth consecutive rise in 2024.
“The rate of increase in price level which was 0.49% in April is now projected to increase to 0.63%, which suggests that price will not be moderating anytime soon.
“This trend combined with other exogenous factors, i.e. the proposed minimum wage review and increase in the rate of money supply, shows that price inflation is still very potent.”
Vetival Capital on its part said: “The near-term outlook for inflation has been blurred by many factors – fiscal intervention serving as a short-term support for food prices; higher power tariffs for a group of energy consumers, and the recent weakness in the Naira, all serving as price triggers.
“We understand that beyond fiscal intervention, the ongoing dry season harvest in the northwest is below average, while conflict is restricting access to farmlands in the northeast. Following recent incidents of fuel scarcity, we see headline inflation ascending further to 34.28% y/y.”
CardinalStone in its projection, said: “We project inflation to print 34.0% in May, as the recent reversal of the naira gains suggests a potential upside risk to prices. Nevertheless, we expect prices to start tapering from July, as the government plans to issue domestic foreign currency-denominated bonds and the $2.25 billion loan from the World Bank bodes well for naira, with a positive pass-through to inflation.”
Cowry Assets on its part stated: “We anticipate a further slow rise in headline inflation to around 34% in May 2024. We believe that the persistent rise in food prices can be attributed to ongoing security concerns in food-growing regions across the country, the logistics challenges of making these farm-produces available and infrastructure deficits.”
