Financial analysts have warned that the recent inflation decline may not continue in September due to rising fuel prices, although food inflation is expected to ease.
They believe the Central Bank will hold off on major policy changes until inflation significantly decelerates.
However, the analysts also criticized the official inflation data, stating it does not reflect the severe economic hardships, particularly rising food costs and fuel scarcity, faced by Nigerians.
The National Bureau of Statistics (NBS) reported on Monday that Nigeria’s headline inflation rate decreased to 32.15 per cent in August 2024, marking the second consecutive monthly decline.
According to the August Consumer Price Index (CPI) report, the figure represents a decrease of 1.25 percentage points from July’s rate of 33.40 per cent.
However, on a year-on-year basis, inflation rose by 6.35 percentage points compared to the 25.80 per cent recorded in August 2023.
Head of Research at FSL Securities Limited, Mr. Victor Chiazor, in an exclusive chat with NewsNGR, raised concerns that the recent decline in inflation recorded in July and August may not continue into September.
He pointed to the potential impact of an upward revision in Premium Motor Spirit (PMS) prices, which could exert additional inflationary pressure.
Speaking on the inflation outlook, Chiazor, however, noted that a significant spike in inflation is not expected in September, He added that food inflation is projected to continue easing due to the ongoing harvest season.
This seasonal factor is anticipated to help moderate any acceleration in the Consumer Price Index (CPI) for September.
“In September, we do not foresee a massive jump in inflation, as food inflation is likely to ease further on the back of the harvest season. This should help temper the overall inflationary pressure,” Chiazor explained.
Regarding market reactions, he highlighted that major players in the financial markets, as well as the Central Bank of Nigeria’s Monetary Policy Committee (MPC), are unlikely to make any drastic moves in response to the inflation data.
Instead, they are expected to wait for more substantial signs of inflationary deceleration before considering a shift away from the current tightening monetary stance.
“The moderation in headline inflation for two consecutive months offers some relief, especially given that both headline and month-on-month inflation have eased,” he added.
Chiazor attributed the recent slowdown in inflation largely to a decline in food inflation, driven by the harvest season, along with the base effect.
However, he expressed caution over rising core inflation, which excludes volatile items such as food and energy. Core inflation continued to edge higher, reaching 27.58% in August, up from 27.47% in July.
“While food inflation has provided some relief, core inflation remains a concern. The persistent rise in less volatile goods signals ongoing inflationary pressures that require close monitoring,” Chiazor warned.
As Nigeria heads into September, the analyst suggested that inflation could see mixed dynamics, with food inflation easing while core inflation may continue to trend upward due to structural factors and energy costs. This may delay any potential policy adjustments by the MPC.
Managing Director of Highcap Securities Limited, Mr. David Adonri, expressed scepticism about the recent inflation data released by the National Bureau of Statistics (NBS), stating that the figures no longer reflect the true situation on the ground.
Adonri highlighted the disconnect between the official inflation statistics and the reality faced by Nigerians, particularly with regard to rising food prices and the severe impact of fuel scarcity.
“The inflation figures from the NBS are hard to take seriously given the current economic climate. In August, food prices surged, and the economy was severely strained by the relentless fuel scarcity,” Adonri remarked.
According to Adonri, the inflation data fails to capture the full extent of the economic hardships experienced by the public, especially in light of the sharp increase in the cost of food and the challenges posed by fuel shortages, which have further driven up the cost of goods and services across the country.
He called for more accurate and transparent reporting of economic indicators to better reflect the realities faced by citizens.