Tony Chukwunyem 
With the National Bureau of Statistics (NBS) generally expected to release the much anticipated rebased Consumer Price Index (CPI) and Gross Domestic Product (GDP) data any moment from now, Financial Derivatives Company (FDC) has said that the country’s headline inflation likely declined to 33.35 per cent in January from 34.80 per cent in the previous month.
The firm, which made the prediction in a report released over the weekend, said the projected decline in January inflation would be majorly driven by the improving stability of the naira as well as logistics costs stabilization.
It stated: “Nigeria’s inflation is now a major topic of discussion among small businesses, retailers, and policymakers, as all eyes remain on the Central Bank of Nigeria (CBN), which has made price stability a top priority.
Using the old methodology, we analysed inflation trends ahead of the CPI basket reconstitution outcome.
“Based on a simple regression model and empirical analysis from our Lagos market survey – headline inflation is projected to decline to 33.35 per cent from 34.80 per cent. Notably, other indicators show that the trend is in the same direction.
Food inflation is expected to decline sharply by 2.6 per cent to 37.24 per cent from 39.84 per cent. Core inflation is estimated to taper to 27.62 per cent down from 29.28 per cent.
This downward trajectory is under pinned by an eight per cent drop in petrol prices, a 2-3 per cent naira appreciation, and seasonal factors.”
The FDC further said: “The primary driver of easing inflationary pressures in Nigeria today is the improving stability of the naira. The currency has shown signs of resilience, helping to moderate cost pressures.
As a result, the prices of imported goods such as rice, beans, and wheat have steadied (keeping the prices of wheatrelated products like noodles, semovita, and bread flat).
“Similarly, the cost of locally produced agricultural commodities, including garri, rice, beans, and onions, is seeing some relief as logistics costs stabilise (buoyed by a decline in petrol/ diesel pump prices, and supply increases due to seasonalities.
However, due to the fundamental principle of economics – prices are sticky downward, we are seeing factor prices decline but are not having a corresponding drop in commodity prices and transport fares.”
According to the firm, monthon-month inflation, “which reflects the most current economic conditions, is likely to flatten out to 1.54 per cent (annualized at 20.17%) from 2.44 per cent.”
Specifically, it said that: “Food inflation is expected to decrease to 2.41 per cent from 2.66 per cent, due to currency scarcity and consumer resentment forcing retailers to lower prices.
Core inflation is also projected to ease to 2.12 per cent from 2.24 per cent, attributed to a stable exchange rate and reduced logistical expenses, notably with an eight per cent drop in petrol prices and appreciation in the exchange rate, easing imported inflation’s impact.”
However, FDC said the projected slowdown in headline inflation in January, “is expected to be short-lived as Ramadan and Easter celebrations often lead to increased food prices due to higher demand – (which) posts some inflationary threats.
New Telegraph reports that if the firm’s projection for January inflation proves accurate, it would be the first slowdown in inflation since September last year. In an earlier report, FDC forecast that inflation could drop to 33.12 per cent at the end of Q1’25 from 34.8 per cent in the previous quarter.
According to the firm, the decline in inflation will be, “supported by the basket reconstitution (CPI rebasing) and a stable naira.”
Interestingly, the FDC said in the report that the naira is likely to appreciate in the official market to N1,400 per dollar at the end of Q1’25 compared with N1,535/$1 at the end of Q4’24.
It said that the naira’s expected appreciation will be driven by “sustained CBN interventions” to support the local currency.
