October Inflation Projected to Spike: Analysts Estimate a Rise to 33.48% ?

In a recent forecast, analysts are predicting that Nigeria’s inflation rate for October 2024 will jump to 33.48% from the 32.7% recorded in September. The anticipated increase, set to be confirmed by the National Bureau of Statistics on Friday, highlights ongoing inflationary pressures driven by multiple factors, including fuel price hikes and recent floods in northern Nigeria, which have impacted the harvest season.

Key Drivers of the Inflation Rise:

• Fuel Price Hikes: The rise in fuel costs, adding about 15% to the price of PMS, has intensified transport expenses, which, in turn, drives up food and goods prices.

• Flood-Related Crop Losses: Northern Nigeria’s flash floods have impacted harvests, reducing crop yields and pushing food prices even higher in October.

• Naira Depreciation: The weakening of the naira (now at around N1,635.11/USD) has also inflated prices of imported goods, further contributing to inflation.

Lukman Otunuga, a Senior Market Analyst at FXTM, notes that while inflation has shown signs of cooling in recent months, the challenges around fuel and agricultural supply have pushed the October rate up. Otunuga also highlights that the Central Bank of Nigeria’s decision to raise interest rates to 27.25% in September marks its fifth hike in 2024—a strategic move aimed at bolstering the naira and encouraging investment. However, until the naira stabilizes, inflation may remain elevated.

Meristem analysts echo these projections, pointing to the naira depreciation and rising core inflation, now expected to reach 28.64%. According to Meristem’s report, food inflation remains a significant contributor, spiking due to limited supply, higher transport costs, and dependency on imports for essential goods.

As Nigeria navigates these economic pressures, the upcoming inflation report will provide further clarity on the depth of inflationary impacts and inform the CBN’s next steps.