Nigeria’s inflation remains hot, stubborn - Expert

Senior Research Analyst at FXTM, Lukman Otunuga, said unlike the United States where consumer prices have come down from a peak of 9.1 per cent in June 2022 to 3/2 per cent last month, Nigeria’s inflation remains hot, stubborn and unyielding. He stated that the current yearly inflation rate for Africa’s largest economy stands at a whopping 24.08 per cent – its highest since September 2005.

Otunuga said with the inflation beast drawing strength from rising food prices, transportation and import costs, it is forecast to tick even higher. Ultimately, he said persistent signs of rising inflation may force the CBN to increase the monetary policy rate (MPR) again at its next policy meeting.

He noted that it is worth keeping in mind that the CBN has recently lifted its benchmark rates by 25 basis points (bps) to 18.75 per cent – its fourth consecutive rate hike in 2023. While higher rates have the potential to cap and control inflation, it could come at the cost of economic growth which expanded by 2.31 per cent during the first quarter of 2023, he said. He said dollar weakness could become a major theme in the second half of 2023 as the Federal Reserve concludes its hiking cycle.

The analyst said with inflationary pressures easing in the United States and the Federal Reserve shifting to data dependence for future monetary policy decisions, the odds of another hike are falling significantly.

Speaking on oil prices globally, he said the prices have the potential to push higher amid growing optimism over the global demand outlook. According to the International Energy Agency, global oil demand has surged to a record high, thanks to strong consumption from China. On the supply side, he said production cuts from OPEC+ have fueled concerns around tighter supply, further supporting upside gains.