- The National Bureau of Statistics (NBS) has released the June inflation rate, which reached a new 28-year high of 34.19%
- Analysts had predicted a rise in the rate owing to rising food prices, high transportation costs and challenges in the Agric sector
- Also, analysts say prevalent currency pressures will continue to negatively affect food and energy prices in the short term, predicting inflation to slow to 33.27% in July
According to the data released by the National Bureau of State Statistics (NBS) on Monday, July 15, the June rate is 0.24 percentage points higher than the 33.95 per cent recorded in May 2024.
On a year-on-year basis, the June inflation rate is 11.40 per cent points higher than the rate recorded in June 2023, which was 22.79 per cent.
The NBS stated, “In June 2024, the headline inflation rate increased to 34.19 per cent relative to the May 2024 headline inflation rate which was 33.95 per cent. Looking at the movement, the June 2024 headline inflation rate showed an increase of 0.24 per cent points when compared to the May 2024 headline inflation rate.
“This means that in the month of June 2024, the rate of increase in the average price level is higher than the rate of increase in the average price level in May 2024.”
Similarly, food inflation rose in June 2024 to 40.87 per cent compared to the figure recorded in May 2024, which was 40.66 per cent, representing a month-on-month increase of 0.21 per cent.
The NBS attributed the increases to a rise in the average prices of food items such as groundnut oil, palm oil, etc (oil and fats class), water yam, cocoyam, cassava, etc (potatoes, yam and other tubers class), tobacco, catfish fresh, croaker, mudfish fresh, snail, etc. (fish class).
Also, core inflation, which excludes prices of food and energy, increased to 27.40 per cent from 27.04 per cent in May.
Analysts had predicted a higher inflation rate
It would be recalled that the inflation rate first soared to a record 28-year igh in May 2024 of 33.95 per cent, which predicated analysts’ prediction that the rates would further increase in June.
The analysts attributed the continued inflationary pressures to challenges in the agriculture sector, such as insecurity in food-producing regions, crop infestation, higher transportation costs and naira depreciation, with the devaluation of 1.28 per cent against the dollar between May and June and currently at N1,505$.
A team of experts at Meristem said these challenges contributed to higher food prices and ultimately impacted inflation.
The experts had projected that headline inflation will rise to 34.01 per cent, food inflation at 40.74 per cent compared to 40.66 per cent in May and core inflation (including all items less farm produce and energy) at 27.30 per cent.
They said, “We expect the core inflation index to rise further, driven by higher transportation costs and the depreciation of the naira (1.94 per cent in June).
“However, given the relatively stable naira exchange rate on the NAFEM window during the period (compared to a 5.61 per cent depreciation in May 2024), we anticipate a month-on-month moderation in the core index. Ultimately, we project a rise in headline inflation.”
Also, analysts at Cowry Assets Management Limited projected a higher inflation figure of 34.25 per cent due to challenges in the agriculture sector and high transportation costs.
The analysts said, “Over the past year, food prices in Nigeria have soared, driven by factors such as supply chain disruptions, currency depreciation and the impact of climate change on agriculture. This has led to basic staples like rice, beans and vegetables becoming increasingly unaffordable for the average Nigerian, stretching household budgets to their limits.
“The food index constitutes over 51 per cent of the inflation basket and this escalation can be attributed to rising prices in fundamental food commodities, including bread, cereals, oil and fat.
“Specifically, all 43 food items surveyed reported price increases on a year-on-year and month-on-month basis between April and May 2024. An unweighted simple average, which does not account for consumption trends, shows that the average price of food items in the bureau’s designated basket increased by 137.3 per cent year-on-year and 13.4 per cent month-on-month.”
Currency pressures will continue, FG’s 150-day import duty suspension may alleviate inflationary pressures – Analysts
Analysts at Stears have said the increasing inflation rate poses economic challenges, noting that prevalent currency pressures will continue to affect food and energy prices in the short term negatively.
They also predict that the headline inflation rate will slow down towards a bear forecast of 33.27 per cent by July owing to some government policies like the 150-day import duty suspension.
They said, “The naira continued its downward trend towards N1,563/$ in July, indicating that the persistent increase in living costs will keep squeezing consumer disposable income.
“Looking ahead, headline inflation rate will likely slow towards our bear forecast of 33.27 per cent in July due to base effects. The rate of increase in inflation has steadily tapered, from 1.80ppt in February to 0.20ppt in June, indicating that inflation may have reached an inflection point and is starting to cool.
“The government’s recent 150-day import duty suspension on staples such as rice, wheat and beans is also anticipated to alleviate some inflationary pressures.
“Meanwhile, the upcoming Monetary Policy Committee (MPC) meeting on July 22-23 is likely to maintain a hawkish stance. Our analysts foresee the rate being maintained at 26.25 per cent or increased by 100-150 basis points to curb inflation.”
Ahead of the Monetary Policy Committee (MPC) meeting, there are predictions that the committee may further hike the Monetary Policy Rate (MPR) in its efforts to rein in inflation. Already, the MPC has raised the MPR by 650 basis points since the beginning of the year and it currently stands at 26.25 per cent.
New rates comes after Cardoso said CBN’s strategies have kept inflation below 50% m-o-m in five months
The inflation data from the NBS comes days after the governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, said the bank’s strategies have been effective, leading to a 50 per cent reduction in inflation month-on-month between February and May 2024.
Cardoso, who was speaking during a fireside chat with the publisher/CEO, BusinessDay Media Limited, Frank Aigbogun, at the 2024 CEO forum, with the theme, ‘Leadership in Tough Economic Times,’ assured that “in a not too distant future, things will begin to moderate.”
He added that the interest rate hikes by the MPC have been instrumental in taming inflation within the period and that the rates will come down soon.
Cardoso said, “The MPC is not oblivious to the fact that the country does need growth. If these hikes hadn’t been done at the time, the naira would have almost tipped over, so it helped to stabilise the naira.
“Interest rates are not set by the CBN governor but by the MPC committee composed of independent-minded people. These are people not given to emotion but to data. The MPC clarified that the major issue is taming inflation, and they would do what is necessary to tame it.”
Tracing Nigeria’s inflation: A tenure-by-tenure breakdown from 1960 to present
Meanwhile, TheRadar had reported that following the recent Sallah celebration, Nigerians complained of the soaring inflation rate and its impact on food prices, saying it was the most acute in recent years.
Using data from the National Bureau of Statistics, TheRadar did a tenure-by-tenure analysis of the inflationary trend in Nigeria from 1960 till date.
