Nigeria’s headline inflation is forecasted to surge to 32.63% in March 2024, as revealed by Muhammad Sani Abdullahi, Deputy Governor of the Economic Policy Directorate at the Central Bank of Nigeria (CBN). Abdullahi shared this economic projection during the CITI-CEEMA Macro Conference held on March 20, 2024, in London, shedding light on the country’s economic outlook.
The anticipated rise in inflation is attributed to three primary factors: increased energy costs, the impact of exchange rate fluctuations, and ongoing security challenges. According to a presentation obtained by Nairametrics, these factors are expected to drive the inflation spike:
- High Energy Prices: The lingering effects of fuel subsidy removal are expected to raise the cost of household utilities, transportation, and production.
- Exchange Rate Passthrough: The depreciation of the naira due to the market-determined exchange rate policy is likely to impact domestic prices.
- Insecurity: Security issues affecting food production, the conclusion of the harvest season, and the high cost of farm inputs could negatively affect food prices.
Despite the current inflationary pressures, the CBN remains optimistic about a turnaround, with inflation projected to begin its downward trend from May 2024 onwards. This optimism is underpinned by a series of strategic measures aimed at addressing rising inflation:
- Adoption of an Inflation Targeting Framework
- Implementation of more active communication strategies
- Shift towards a tighter monetary policy stance
To support these measures, the Monetary Policy Rate (MPR) has been increased by 400 basis points to 22.75%, and the Cash Reserve Ratio (CRR) has been adjusted to 45% from 32.5%. Additionally, adjustments have been made to the asymmetric corridor around the MPR to +100/-700 basis points from +100/-300 basis points, signaling a strong commitment to managing inflation expectations.