The National Bureau of Statistics launched Nigeria’s inflation figures for the month of December 2020, which places headline inflation charge at 15.75%, a giant leap from the 14.89% recorded in the earlier month.
It is obvious that Nigerians have continued to grapple with the impact of the Covid-19 induced lockdown, sustained border closure (till December 2020), insecurity, amongst others, that has plummeted the financial system into recession.
Nigeria’s inflation climbed to its highest in 3 years, which is a trigger for fear as analysts predicts increased inflationary stress for the 12 months 2021.
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Wale Okurinboye, CFA, Head Investment Research, Sigma Pensions
In a chat with Wale Okurinboye, he addressed the elements that may decide the route of Nigeria’s inflation in 2021.
“I expect lingering impact of the main shocks to 2020 inflation i.e. fuel price increments (+25-30%), electricity price hikes (55-65%), currency weakness and food price pressure to drive headline inflation towards 16-18% levels in the first half of 2021.
“However, strong base effects from 2020 will help contain upside over H2 2021. In all, I expect inflation to remain elevated over the year reflecting the shocks to key input prices.”
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While commenting on actions to mitigate the present developments, he added that in order to decrease inflation, Nigeria wants to handle value points: provide chain round meals (sort out insecurity points in key crop producing areas), guarantee alternate charge stability and hope no main improve in worldwide oil costs.
He nevertheless acknowledged that, “given the impact of Covid-19 on Nigeria’s external and fiscal accounts, this might be too much to ask.”
Victor Aluyi, Head, Portfolio Management, Commercio Partners
“I believe we are going to see the headline figures continue to spike over the next couple of months, although not as much because the December spike was quite expected as we saw pent up spending, which basically characterises that period whilst putting pressure on food inflation.”
READ: Nigeria’s GDP development to rebound between 1.7% and 2.0% in 2021 – United Capital report
This added to the elements now we have been experiencing prior to now, the foreign money weak point, provide chain disruption amongst others.
“We could also see that the border closure has also played a significant role in exerting that upward pressure on headline inflation. However, we are likely to see the pressure ease due to the presidential directive to open up land borders in December 2020.”
“Nigeria’s inflation is likely to top 16% and probably closer to 18% in 2021. Although, the recent inflationary pressure is due to structural issues but monetary policies can also play its part in trickling down the numbers.”
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Wale Olusi, Head of Research, United Capital
According to Wale Olusi, there are a variety of elements that will decide inflation charge in 2021, however posits that the inflation determine is prone to high 16% or go as excessive as 19% if nothing is finished about it.
“We at United Capital expect the headline inflation rate to peak at around 16% before pulling back, if no further policy adjustment is made.”
He, nevertheless, means that inflation might ease because of the reopening of the land borders as meals costs are already trickling down in some areas of the nation. He additionally talked about that different elements resembling oil costs, financial coverage and structural points might drive the headline inflation increased if satisfactory measures are not put in place.
READ: Continuous improve in inflation charge might weaken financial system – CBN report
On tightening financial stance
Wale Okurinboye opines that he expects the Apex financial institution to lift the MPR at some level in the 12 months, presumably by 100 – 200 foundation factors. He, nevertheless, tasks that Nigeria will exit recession by the second quarter of the 12 months assuming there isn’t any re-introduction of lockdown measures.
Okurinboye defined that, “this is an epidemic induced recession not a structural one, so as business activities return to normal on the non-oil side and as OPEC lifts output curbs on oil production, I expect Nigeria to exit recession in Q2 2021.”
In the phrases of Victor Aluyi, “the response of the Monetary committee has been that of an output growth, which is why we see reduction in the benchmark rate. They are trying to starve off the complete impact of the Covid-19 challenge and also reflate the economy.
“Meanwhile, I don’t see any adjustment in the coming months in terms of tightening, but it remains to be seen what the impact of the loosened rate has been, whether it has spurred growth in helping the economy recover quicker.”
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Wale Olusi expects the Monetary Policy Committee (MPC) of the Apex financial institution to tighten its financial coverage stance at some level in the second and third quarter of the 12 months.
He additionally expects the financial system to rebound by about 1.7% to 2% buoyed by elevated financial exercise and enchancment in the international oil market.
What it is best to know
Nigeria’s inflation rose to fifteen.75% in December 2020, which is the highest charge recorded since December 2017.Inflation has been on a persistent upward pattern since September 2019, round the time the federal authorities ordered the closure of land borders.The 2021 price range tasks that Nigeria’s inflation will shut at 11.95% in 2021 and a projected GDP development of 3%.Nigeria’s meals inflation additionally rose to its highest in 3 years. The final time Nigeria recorded an increase in the meals index as excessive as 19.56% was November 2017.
READ: Non-oil sector is important to Nigeria’s financial restoration in 2021 – Cordros Capital
The Nigeria financial system has been ravaged by the results of the Covid-19 outbreak, international oil costs, and border closure, which exerted inflationary stress, thereby eroding the buying energy of shoppers in the nation.
Meanwhile, analysts have predicted extra doom in the quick time period however expects a optimistic spin as we go to the second half of the 12 months.
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