Inflation expected to rise to 11.53% in September – FDC
Financial Derivatives Company (FDC) has predicted that inflation rate is expected to increase to 11.53 per cent in September, 2018.
The prediction released yesterday by the company indicated that this will be the second consecutive month of increasing inflation after an 18-month consistent decline.
“The rise in the inflation numbers would be primarily driven by higher food inflation as the recent floods in the middle belt region has undermined agric output,” the company stated.
The FDC has predicted that minimum wage review which the Nigeria Labour Congress is pushing for could trigger inflation.
The National Bureau of Statistics is expected to release the official data on inflation rate for the month of September soon.
“The rate of increase is not as significant as the impact of the trend on determining inflation expectations,” the FDC stated.
The company stated that its projections also indicate that the monthly inflation will move correspondingly with the yearon-year inflation, increasing to 1.06 per cent (13.48 per cent annualized).
The report indicated that the herdsmen/pastoral crisis together with the recent floods impeded supply.
“Increasing inflation at a time of wage negotiation is like throwing a flame on gasoline. The unions are likely to be more aggressive in their demands especially in an election season,” the economic think-tank stated.
In relation with Nigeria’s peers, the average inflation rate for Sub-Saharan African (SSA) countries in 2018 is expected to be approximately 9 per cent, far below Nigeria’s.
Three of the SSA countries under FDC’s review have released their inflation numbers for September. While Uganda and Zambia recorded a decline, Kenya’s inflation rate increased.
“Most of the SSA countries under our review maintained status quo at their last monetary policy meeting, with Uganda being an outlier,” the report stated.
Meanwhile, at the last MPC meeting in September, three of the ten members in attendance voted in favour of increasing the monetary policy rate (MPR).
However, the decision to hold all policy parameters was premised on the need to get more clarity on the timing and quantum of anticipated liquidity injections into the economy from pre-election spending and minimum wage.
“If our projections are accurate, increasing inflation at a time of wage negotiation is like throwing a flame on gasoline. The unions are likely to be more aggressive in their demands especially in an election season,” the report stated.
The report stated that the proposed upward review of minimum wage coupled with the reversal of capital flows from emerging market economies due to the rise in the interest rate differential in the US could embolden the hawks in the MPC, who are calling for another cycle of tightening.