Nigeria’s inflation to increase but at a slower pace in March as exchange rate stabilizes

The National Bureau of Statistics (NBS) will release its CPI and inflation report for the month of March next week (April 15) as scheduled. Expectations are that Nigeria’s headline inflation (year-on-year change in the general price level) will increase further to 32.13% from 31.7% in February i.e. the average price of commodities will increase by 32.13% between March 2024 and March 2023. However, the rate of increase is expected to reduce to 0.43% (the difference between 32.13% in March and 31.7% in February) from 1.8% (the difference between 31.7% in February and 29.9% in January). This suggests that inflation could reach its peak soon and begin to decline.

Interestingly, month-on-month inflation, which is the monthly change in the general price level is projected to decline by 0.93% to 2.19% (annualized at 29.64%), after increasing for four consecutive months. This further supports the notion that headline inflation could begin to taper soon.

Notably, both the food and non-food baskets are expected to exhibit similar trends, with the annual food and core inflation rates increasing but at a slower pace to 38.49% and 25.27% from 37.92% and 25.13% respectively in February. On a monthly basis, food inflation is projected to fall to 2.49% from 3.79%, while core inflation is estimated to decline to 2.02% from 2.18%.

This ease in inflationary pressures can be largely attributed to the CBN’s forex market reforms and aggressive monetary tightening. In the last seven (7) weeks, the MPC has increased the monetary policy rate by a total of 600 basis points to 24.75% p.a. and the Naira has gained over 30%. Inflation Chart

Inflation cools across Sub-Saharan Africa

Inflation is beginning to taper in most countries across Sub-Saharan Africa. Of the 48 SSA countries, 15 have reported their inflation data for the month of March with nine (9) recording declines, five (5) posting increases, and one (1) flat. According to the World Bank, The median inflation rate in the region is expected to decline to 5.1% in 2024  from 7.1% in 2023, supported by the improvement in the global supply chains, monetary tightening, and fiscal consolidation.

Inflation Table

Nigerian inflation could reach an inflection point in Q2’2024

Nigerian headline inflation is likely to reach its peak in Q2 and begin to decline afterward on sustained monetary tightening and stability of the exchange rate. According to the World Bank, Nigerian inflation is expected to average 24.8% in 2024, slightly higher than an average of 24.52% in 2023.





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