New Telegraph

Analysts fret over inflation

Nigeria’s inflation rate, according to data released by the National Bureau of Statistics (NBS), last week, may have retreated for the first time in 20 months to 18.12 per cent in April 2021 from 18.17 per cent recorded in March, but financial analysts in the country still worry that prices could remain high in the coming months. For instance, reacting to the April 2021 inflation numbers in a note obtained by New Telegraph at the weekend, analysts at Cowry Asset Management Ltd stated: “Despite the surprise moderation in inflation rate, we remain cautiously optimistic and expect prices to remain sticky due, in part, to the on-going rainy season and the lingering effects of structural bottlenecks and insecurity.

Other factors include probable upward adjustment to electricity tariffs, effect of higher crude oil prices on transportation costs as well as likely increase in imported food due to upward pressures on exchange rate.” Also, commenting on the NBS data, analysts at FBNQuest Research said: “The current inflationary pressure induces macroeconomic instability and also negatively affects the welfare of households and fixed income earners. CBN’s in-house estimates show that headline inflation will remain above 17.9 per cent in 2021. “Persistent high inflation remains a key concern for monetary policy.

At the last monetary policy committee (MPC) meeting in March, the committee retained all parameters and reiterated its stance that inflationary pressure is mainly due to legacy structural factors across the economy and not largely associated with monetary factors.” Similarly, in their reaction, analysts at CardinalStone Research stated: “In our view, the moderation in year-on-year food inflation may have reflected the initial impact of increased market supplies due to the effects of the dry season harvest, which commenced in April. “However, the combination of higher demand pressures (stoked by the recent festivities), elevated transport cost and limited market functioning due to trade route disruptions, may ensure that the risks to food inflation remain firmly biased to the upside. “On the core inflation front, energy prices are likely to remain the main conduit for potential inflationary pressures in the coming months, with authorities seemingly tilting towards a potential downstream deregulation that could bite before it heals the cost of living of the populace. We expect headline inflation to rise by 18bps to 18.30 per cent YoY in May 2021 and likely re-engineer expectations for some yield increases.”

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