Sustained Rise In Food, Energy Prices May Accelerate Inflation To 19.07%
The sustained rise in prices of foods items and energy may trigger Nigeria’s inflation rate for July to 19.07 per cent, a rise from the 18.60 per cent announced for June, 2022.
The latest edition of Access Bank Economic Intelligence report attributed sustained surge in food and energy prices as likely drivers for the anticipated inflationary surge.
The National Bureau of Statistics (NBS) is billed to announce the inflation figure for July on August 15.
The EIU report said that the rise in food and energy prices was due to hike in prices of “aviation fuel, diesel, kerosene prices and rising Automotive Gas Oil (AGO).”
Access Bank’s EIU report also said that rise in staple food prices was largely driven by insecurity in the food producing states and shortages in wheat-producing provinces.
“Access Bank Economic Intelligence Unit forecasts headline inflation for July 2022 to rise to 19.07 per cent from 18.60 per cent recorded in June 2022.
“The rise was attributed to increase in diesel and aviation fuel prices, increase in money supply in the economy, exchange rate passthrough effect and planting season effect,” the report said.
The EIU said its methodology entailed the application of an autoregressive model using lags of the Composite Consumer price Index (CPI) and a survey-based inflation expectation within the same product definitions adopted by the NBS.
“Food and energy prices rose in July following the surge in aviation fuel, diesel, kerosene prices and rising Automotive Gas Oil (AGO).
“Consequently, we expect the CPl to rise to 461.41 points from 455.35 points in the preceding month.
“The steep rise in staple food prices is largely driven by insecurity in food producing states and shortage in wheat-based consumables spurred by the ongoing Russia-Ukraine crises.
“Prices of food and non-alcoholic beverages, the largest component in the consumption basket (with a weight of 51.8 per cent) ascended compared to last
month’s items that rose in prices included onions, yam, chicken, egg, vegetable oil and flour.
“The Naira depreciated at the Nigerian Autonomous Foreign Exchange (NAFEX) window by N5.88/US$ to N427.17/US$ on July 29th, 2022,from N421.29//US$ the previous month.
“We hold the view that yields would remain around same levels given that no significant triggers warrant a yield spike in the market.
“Yields on the 3-month & 9-month treasury bills rose to 5.32 per cent and 6.98 per cent on July 29th, 2022, from 4.65 per cent and 5.87 per cent, respectively in June 2022,” the report stated.
.”The CBN monetary policy committee unanimously voted to hike the monetary policy rate (MPR) by 100 basis points to 14 per cent at its last meeting in July 2022.
“This came after the key policy rates was advanced to 13% a month ago from 11.5%.
“The committee raised rates to rein in the aggressive soaring inflation as the uptrend could potentially hamper economic growth in its unrelenting resolve to restore price stability.
“We envisage that this action may have little effect in driving inflation rate southwards in the coming months.”
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