Ahead of the official release of March inflation data by the National Bureau of Statistics (NBS), and amid the lingering headwinds, CAPE Economic Research and Consulting has projected March 2024 inflation rate in Nigeria to hit 32.65 percent.

The NBS reported that In February 2024, Nigeria witnessed a surge in its headline inflation rate, reaching 31.70 percent, up from 29.90 percent recorded in January 2024, marking a significant increase of 1.80 percent.

CAPE Economic Research and Consulting in its analysis pointed out that the key drivers of the headline inflation forecast remained, food prices, exchange rate, housing, and utility prices which contributed 4.70 percent, 0.38 percent, and 0.31 percent respectively.

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In February 2024, Nigeria experienced a continued upward trend in its general price level, driven by various factors including escalating input costs, a deteriorating exchange rate, and security challenges, among others.

This trend aligned with CAPE’s forecast for the month. Headline inflation increased to 31.7 percent from 29.90 percent in the previous month, indicating a 1.8 percentage point rise in the general level during the review period.

Headline inflation year-on-year was 9.79 percentage points higher than the 21.91 percent recorded in February 2023.

Similarly, food inflation rose to 37.92 percent in February 2024 compared to 35.41 percent in the preceding month.

This marked a 13.57 percentage point increase from the 24.35 percent recorded in February 2023. The surge in food inflation was primarily driven by higher average prices of bread and cereals, potatoes, yams, and other tubers, fish, as well as coffee, tea, and cocoa.

Core inflation also climbed to 25.13 percent in February 2024, up from 23.06 percent in the previous month and 18.37 percent in February 2023.

This increase was driven by rising prices of passenger road transport, housing rentals, medical services, and pharmaceutical products.

In its publication, volume 3 Issue 4 April 2024, CAPE said, “Inflation is expected to further heighten in March 2024. Our forecast showed that inflationary pressure would heighten as headline, food and core inflation are expected to rise to 32.65, 38.2 and 25.13 per cent respectively.”

It highlighted that price pressures are expected to remain heightened and remain above pandemic levels as tightening efforts continue to crystalise.

CAPE noted that Nigeria’s Q1 2024 output growth is expected to be lower than Q4 2023 but remains positive.

“Forecast shows that inflationary pressure in Nigeria heightened in March 2024, with headline inflation rising to 32.65 percent”, it further stressed.

The global economy exhibited resilience in the first quarter of 2024 despite increasing challenges and prospects for the global economy remained robust, even in the face of escalating geopolitical tensions and inflationary pressures.

Strong public and private consumption, despite tight monetary conditions, continued to support global activity, along with efforts to restore labor participation and supply chains.

“As we move into the second quarter of 2024, aggregate near-term global output growth prospects are expected to further improve.

“In advanced economies (AEs), an unprecedented pro-cyclical widening of the United States fiscal deficit in 2023 stimulated domestic demand, aided by a resilient labor market driven by immigrant workers, thus explaining the unexpected resilience in output growth.

“Meanwhile, in Europe, economic struggles persist, with recession in the United Kingdom (UK) and Germany weighing heavily on France and several other economies in the region. The economic slowdown in the UK, resulting from tightening measures and structural growth constraints in Germany, has proven more impactful than initially anticipated”, CAPE Consulting stated.

It explained that in emerging markets, despite the significant resilience displayed by several individual countries, concerns persist regarding the collapse of China’s property market, which continues to dampen prospects.

According to CAPE, evidence of deflationary pressures is on the rise, with housing sales in China expected to sharply decline again this year. Governments are intensifying their support through expansive fiscal and monetary policies to prevent further deterioration of economic growth.

CAPE said, “Overall major obstacles to output growth include weak consumer demand, geopolitical fragmentation, and the full impact of tight monetary and financial conditions.

“In terms of inflation, performance varies across countries, with pressure on households increasing in several economies despite widespread tightening measures.

“Upside risks to inflation include conflicts such as the Israel-Hamas conflict and Russia’s war in Ukraine, impacting commodity prices such as oil and grains.

“Widespread policy rate hikes across both advanced and emerging economies to curb inflation remain divergent, with a reversal of the declining inflation trend in the United States and sustained inflation uptick in several emerging markets compromising gains.

“The slight stall in progress towards bringing inflation down to the 2 percent target underscores the challenging nature of the ongoing inflation-fighting efforts.

“The longer-term inflationary implications of the COVID-19 pandemic and trade wars may have introduced structural challenges that central bankers may need to reconsider, with central banks cautious of premature easing”.

It stated that the global economy continues to demonstrate resilience as it enters the second quarter of 2024, despite facing numerous challenges and geopolitical tensions.

CAPE, however, noted that the downside risks persist, including a tight monetary policy stance, escalating geopolitical tensions, and weak export demand.

In emerging economies, CAPE Economic Research and Consulting anticipates output growth to fall short of the government’s 5.0 percent target, amidst an ongoing property debt crisis that continues to hinder domestic consumer spending growth.

“Despite anticipated fiscal and monetary support from the government, policymakers have been cautious in their approach to maintain discipline. Initiatives to attract foreign capital with a more business-friendly approach are underway, but substantial actions beyond gestures are awaited by potential investors”, it noted.

CAPE Economic Research and Consulting said it anticipates that improvement in output growth going into 2024 Q2, would be encumbered by various headwinds including the monetary policy rate, foreign exchange volatility, and rising insecurity.

It stressed that the expected improvement in output is however occasioned by seasonal benefits in the agricultural sector and the gains from improvement in the industrial sector with the coming onstream of the Dangote refinery by 2024 Q2.

CAPE Economic Research and Consulting was upbeat about its revised 12-month inflation projection suggesting that inflation would commence moderation by May 2024, all things being equal, and would get to comfortable regions by 2025.

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