Nigeria’s inflation rate is expected to rise further in October 2024, continuing the upward trend observed in September 2024, according to a pool of economists and analysts surveyed by Nairametrics. The October forecast comes amid persistent challenges such as rising energy prices, food inflation, and currency instability, which are expected to drive the headline inflation rate higher.
September Inflation Trends
In September 2024, Nigeria’s headline inflation rose to 32.70% year-on-year (YoY), marking a 0.55% increase from the 32.15% YoY recorded in August 2024. This follows a brief period of relief in July and August when inflation rates showed marginal ease after peaking in June. However, experts predict that inflationary pressures will build in October, primarily due to a combination of domestic and international economic factors.
Factors Driving the Inflationary Outlook
Several factors are expected to contribute to the rise in inflation for October:
- Rising Energy Costs:
- Petrol and gas price hikes: Following the full removal of fuel subsidies, fuel prices have surged significantly. The Nigerian National Petroleum Corporation (NNPC) recently increased petrol prices to N1,030 per litre in Abuja and N998 per litre in Lagos. This surge in fuel prices is expected to have a direct impact on transportation and production costs, adding further inflationary pressure.
- Food Inflation:
- Rising food prices: Food inflation has remained high, with food prices rising by 37.77% YoY in September 2024. This increase is attributed to factors such as insecurity, flooding in key agricultural regions, and limited access to financing for farmers. A market survey by Nairametrics revealed significant price hikes for staple food items such as beans (up to 9.5% increase per bag), noodles (up by 19.8% for some brands), and Milo refills.
- Exchange Rate Volatility:
- The continued weakness of the naira against major currencies has driven up the cost of imported goods. As the naira depreciates, the cost of goods such as food and other essential products rises. Imported food inflation rose to 39.51% YoY in September 2024, reflecting the ongoing challenges in the foreign exchange (FX) market.
- Increased Money Supply:
- The growth in broad money supply (M3) by 15.16% YoY to N108.97 trillion in September 2024 is another factor contributing to inflationary pressures. The increase is largely attributed to government spending and expansion in both domestic and foreign assets. Despite the Central Bank of Nigeria (CBN) adopting hawkish monetary policies such as hiking the Monetary Policy Rate (MPR), excess liquidity remains in the economy, continuing to fuel inflation.
Expert Predictions for October Inflation
Economists and analysts expect the October 2024 inflation rate to rise further, with some projecting a month-on-month (MoM) increase of around 2.55%, resulting in a YoY inflation rate of 33.8%.
- Dr. Ayodeji Ebo, MD/Chief Business Officer at Optimus by Afrinvest, commented that inflation will likely rise due to several key factors, including the energy price hikes, reduced food harvests due to floods, exchange rate volatility, and higher electricity tariffs. Ebo estimates a 2.55% MoM increase and a 33.8% YoY inflation rate for October.
- Mr. Olatunde Amolegbe, MD of Arthur Steven Asset Management, also expects inflation to rise by 50 to 100 basis points in October, driven by the lag effect of fuel price hikes in September and rising transportation costs.
- Samuel Oyekanmi, Research and Insight Lead at Norrenberger Financial Group, predicts a slight uptick in inflation, estimating a 33.1% YoY inflation rate. He cites factors like energy price increases, FX volatility, and widening fiscal deficits as contributing factors.
Government and CBN Measures
Despite efforts by the Central Bank of Nigeria (CBN) to stabilize the naira and control inflation—such as resuming dollar sales to Bureau De Change operators and clearing $1.5 billion in FX backlog—inflationary pressures persist. The CBN’s hawkish stance, including higher interest rates, is expected to continue as the government seeks to curb inflation.
However, the long-term effectiveness of these policies remains uncertain, as inflation is being driven by structural issues such as energy costs, agricultural supply chain disruptions, and persistent FX instability.
The inflation rate in Nigeria is expected to rise further in October 2024 due to a combination of rising energy costs, persistent food inflation, exchange rate volatility, and excessive liquidity. Experts predict a YoY inflation rate of around 33.8%, with energy prices, food insecurity, and FX instability remaining key drivers. While the CBN is taking measures to control inflation, the outlook for inflation remains pessimistic in the short term, especially considering the ongoing economic challenges facing the country.
