According to recent analysis by the Financial Derivatives Company (FDC), Nigeria’s headline inflation is projected to escalate to 32.63% in March 2024. Abdullahi, an expert from FDC, identified three primary factors fueling this surge: soaring energy costs, currency exchange rate fluctuations, and ongoing security challenges plaguing the nation.
Abdullahi elaborated on the factors contributing to the inflationary pressure, stating, “High Energy Prices due to the lingering impact of fuel subsidy removal have led to increased costs in household utilities, transportation, and production expenses. Additionally, Exchange Rate Passthrough resulting from the depreciation of the naira under the market-determined exchange rate policy is expected to directly influence domestic prices. Furthermore, Insecurity has disrupted food production, coinciding with the end of the harvest season and exacerbated by the high cost of agricultural inputs, which may further drive up food prices.”
In response to this concerning trend, the Central Bank of Nigeria (CBN) under the leadership of Olayemi Cardoso has intensified efforts to combat inflation by tightening monetary conditions. Notably, the CBN has raised the country’s lending rate by a significant 600 basis points, reaching 24.75% between its monetary policy committee meetings in February and March.
Under Cardoso’s guidance, the CBN has also successfully stabilized the nation’s currency, the Naira, which has now moderated to around N1,200 per US dollar. This marks a significant turnaround for the currency, which was previously on a trajectory towards a value of N2,000 per dollar in less than two months.
Coronation, a prominent Africa-focused financial institution, echoed similar sentiments, forecasting that inflation is likely to peak in the second quarter before gradually receding, contingent upon prevailing conditions.
As Nigeria navigates through these challenging economic circumstances, stakeholders continue to monitor closely the effectiveness of monetary policies and other measures aimed at curbing inflation and fostering economic stability.
(source : Business Day)
