Analysts have projected that the Nigeria’s May inflation rate to hit a new 17-year high, as Nigerian Bureau of Statistics (NBS) releases last month Consumer Price Index (CPI) report today.
The anticipated increase is attributed to a three per cent decline in the official exchange rate and an 18 per cent growth in the money supply. Insecurity and seasonal price fluctuations have likely contributed to food scarcity, leading to higher food inflation.
Consequently, the core and food sub-indices are expected to rise alongside headline inflation.
Analysts note that the May data would not capture the impact of the recent 150 per cent rise in petrol prices resulting from the removal of the Premium Motor Spirit (PMS) subsidy.
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The total effect of this adjustment will likely become evident in June and potentially more pronounced in July due to the unification of the exchange rate and lags between policy decisions and policy impact. Perhaps reducing PMS pricing trauma, diesel prices, fell in June, offering some Inflationary relief.
Besides, there is optimism concerning increased capital imports and foreign investment, which could gradually push inflation down.
The inflation forecast for FY 2023 is expected to be around 21%. However, uncertainties relating to the suspension of the Central Bank Governor and a statement from the President suggesting his preference for lower interest rates have left the markets slightly bemused.
This situation may prompt the Monetary Policy Committee (MPC) to maintain current rates until there is clarity regarding the direction of monetary policy and the new Central Bank’s leadership. Initial expectations, therefore, suggest that the MPC may hold monetary policy rates at its next meeting.
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