Stears has announced that Nigeria’s inflation rate may rise to 30 per cent by December 2023.
The data-driven insights provider announced this while unveiling its Pan-African inflation forecasts. It projected that Nigeria’s annual inflation rate is set to climb steadily until year-end, culminating at around 30 per cent, a level not attained since the country’s modern democratic era.
The firm stated that its forecasts are based on trusted econometric tools that consider a myriad of factors driving inflation, from general to country-specific dynamics.
In a statement, Stears’ Head of Insights, Fadekemi Abiru, said, “In September, we saw the exchange rate premium—the differential between official and parallel rates—rise to 25.2 per cent, which is a significant increase from what it was in August.
“We expect this gap to keep widening and exerting further inflationary pressures unless we see significant dollar inflows into the economy. We have also had heavy and prolonged rainy season, which has affected harvests. Following the recent release of Nigeria’s September 2023 inflation data, the country’s forecasts have been prioritised, with Kenya’s projections scheduled for early November and forecasts for other African nations coming in early 2024.”
The firm noted that its forecasts aim to guide corporates, professionals, and policymakers in their short-to-medium term pricing, investment, and policy decisions. It added that its inflation forecasts, spanning from October 2023 to December 2024, include both average and year-end predictions for 2023 and 2024.
Nigeria has one of the highest inflation rates in the world and an estimated four million people were pushed into poverty between January and May 2023 because of the worsening cost of living.
According to the World Bank, the removal of fuel subsidy and devaluation and unification of the exchange rate system will continue to increase the inflationary pressure in the country in the near term and erode the purchasing power of the average Nigerian.
In its recent Africa Pulse report, the World Bank noted, “The incoming Tinubu administration implemented a series of reforms that included the removal of fuel subsidies and the devaluation and unification of the exchange rate system.
“Petroleum prices have more than tripled since the subsidies were lifted at the end of May. The naira has weakened by nearly 40 percent against the US dollar since the mid-June devaluation. Although these measures are intended to improve the fiscal and external accounts of the nation, their inflationary effects in the near term can erode the purchasing power of households and weigh on economic activity.”
The country’s inflation rate is now well above the World Bank’s projected inflation rate of 25 per cent for 2023.
In its recent World Economic Outlook report, the International Monetary Fund predicted that high inflation is expected to slow Nigeria’s economic growth to 2.9 per cent in 2023.