New Telegraph

Analysts: Insecurity, others’ll drive inflation higher

Prediction

Security challenges are negatively affecting food distribution across Nigeria

 

The recent upward trend in Nigeria’s inflation rate is likely to continue in the short term (at least) due to rising insecurity, dwindling value of naira on the parallel market, as well as increased transportation costs, analysts have said.

 

According to the latest Con  umer Price Index (CPI) report released by the National Bureau of Statistics (NBS) recently, Nigeria’s inflation rose to 15.92 per cent in March 2022 from 15.70 per cent in February.

 

This means that after dropping marginally to 15.6 per cent in January 2022, from 15.63 per cent in December 2021, inflation has now headed north for the second consecutive month.

The upward trend, according to analysts at Cowry Asset Management Limited, is likely to persist as a result of the security challenge that Nigeria is currently facing, which they said was negatively affecting food distribution across the country.

As the analysts put it in a note seen by New Telegraph,  we expect to see further increased inflationary pressure in the coming months due to rising insecurity, which continue to negatively impact food distribution across the country. More so, the increasing demand pressure on the greenback would further put pressure on cost, coupled with the rainy season and effect of crude oil price on transportation cost.”

 

Also predicting that inflation will maintain its upward trend, analysts at Financial Derivatives Company (FDC), in a report released at the weekend, stated: “Inflation is expected to continue its upward trend (likely to be above 16 per cent in April). This is mostly due to the lingering  impact of cost pressures as higher energy cost persists. This will continue to have a knock-on effect on transport fares, operation costs, and domestic prices.”

 

They further predicted that “oil prices are expected to continue its upward trend in the near term as the Russian invasion of Ukraine persists.” The FDC analysts, however, pointed out that if weak demand from China persists owing to the re-imposition of lockdown as COVID-19 cases rise, they expect the rise in oil price to slow.

 

They also said that besides contending with higher energy costs, Nigeria is not likely to benefit significantly from higher oil price owing to lingering sub-optimal production.

“Pipeline vandalism, oil theft and operational challenges continue to dampen efforts toward ramping up oil production. This implies that oil revenue and export proceeds are expected to remain low which will negatively impact the external reserve position and government revenue,” the analysts added

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