Financial experts project Nigeria's inflation to rise 0.76% in November to 34.64%

Finance experts predict Nigeria's inflation will rise by 0.76% in November, reaching 34.64%, due to increased money supply and persistent cost pressures. This continues the upward inflation trend seen in recent months.

According to the National Bureau of Statistics (NBS), the November inflation report will be published on Monday, December 16. Experts from Financial Derivatives Company (FDC) Limited, using their Lagos market survey and regression model, project a headline inflation rate of 34.64%.

Key Drivers of Inflation

The rise is attributed to seasonal factors and ongoing cost pressures, leading to higher prices compared to November 2023. The Economist Intelligence Unit (EIU) predicts inflation will peak at 35% in December 2024, averaging 27.7% in 2025. Long-term forecasts suggest a disinflationary trend, supported by stable foreign exchange rates, improved trade policies, and base effects.

Food inflation and core inflation are also expected to climb alongside the headline rate. Analysts predict food inflation will rise to 40.02%, while core inflation will reach 29.38%, affecting prices of essentials like eggs, rice, vegetable oil, and sardines.

Monthly Inflation Trends

FDC analysts highlight that monthly inflation, considered a more accurate indicator of current market conditions than annual inflation, is projected to rise to 2.67% (annualized at 37.25%) from October’s 2.64%. This marks the fourth consecutive monthly increase since the temporary decline in August.

“The reasons behind the surge are not far-fetched – they stem from the lingering effects of flooding in agricultural regions, as well as volatility in forex markets,” FDC analysts explained.

Holiday Season Pressures

With Christmas approaching, prices of essential items like rice, eggs, vegetable oil, pepper, and bread are expected to climb further. Analysts from Afrinvest noted: “Food and core inflation are expected to move in tandem with headline inflation to 40.02 percent and 29.38 percent respectively.”

As prices rise, consumers are shifting to cheaper alternatives or reducing the quantity of goods they purchase. This trend is reflected in the declining Purchasing Manager’s Index (PMI).

Food Insecurity and Broader Impacts

Food insecurity in Nigeria has reached critical levels, worsened by insecurity, high transportation costs, and seasonal factors disrupting food supply chains. Rising prices have led to widespread hunger and strained household budgets.

While inflation remains a global issue, experts believe Nigeria’s price spiral is unlikely to subside soon. FDC analysts concluded: “Month-on-month inflation to increase marginally... It implies that the pace of increase in the average price level surpassed the rate observed in October 2023.”