These are certainly not the best of days for the Nigerian
economy as various projections and predictions are not favourable to the
economy; as the nation gears up for the 2019 general elections. The
International Monetary Fund (IMF) on Wednesday predicted a rise in Nigeria’s inflation
rate to 13.5% in 2019.
This was made known by the Director of the Research
Department at the IMF, Gian Maurice Obstfeld, who spoke during the unveiling of
IMF’s World Economic Outlook (WEO), at the ongoing annual meeting of the
International Monetary Fund and World Bank Group in Bali, Indonesia.
He said the Inflation pressures in sub-Saharan Africa have
broadly softened, with annual inflation projected to drop to 8.6 per cent in
2018 and 8.5 per cent in 2019, from 11 per cent in 2017.
According to him,
“In Nigeria and Angola, tighter monetary policy and
moderation in food price increases contributed to tapering inflation. In
Nigeria, inflation is projected to fall to 12.4 percent in 2018, from 16.5
percent in 2017, and to rise to 13.5 percent in 2019.”
IMF Earlier Inflation Forecast
The Bretton Wood Institution had earlier estimated that the
inflation rate in Nigeria would drop to 12.4% in 2018, from 16.5% in 2017.
Certainly, the Nigerian economy is really struggling, as both IMF and the World
Bank have also cut down on their economic growth projections for the Nigerian
economy in 2018. Also, putting into consideration the fact that inflation rate
has just dropped for the first time in 18 months in August.
Current Inflation Rate
According to the National Bureau of Statistics (NBS), the
inflation rate in Nigeria rose to 11.23% year-on-year in August 2018, which is
0.09% higher than the recorded rate in July (11.14%). Inflation rate also
increased by 1.05% on a month-on-month basis, during the period.
The Nigerian economy experienced eighteen consecutive months
of disinflation from January 2017, before inflation rate finally fell in August
2018.
Core inflation stood at 10.00% and decreased by 0.2% in the
month of August from 10.2% recorded in July. On a month on month basis, it rose
by 0.78% in the period under review. It was down by 0.03% when compared with
0.81% recorded in July.
The Composite Food Index (food inflation) rose by 13.16%
during the period under review, compared to 12.85% in July 2018. The figure
shows food inflation has increased on year on year basis, for the first time in
ten months. The reduction was caused by the increase in prices of potatoes, yam
and other tubers, fish, bread, fish, Oil and fats, vegetables and fruits.
Implication
For investors, rising inflation means higher yields on
treasury bills and other government securities. For select borrowers, the rise
in inflation, in theory, should lead to higher rates.
This rise in inflation rate prediction for 2019, after 18
consecutive months of disinflation, does not come as a surprise for many
economic analysts. For example, only a few weeks ago, Nairametrics took a deep
look at key macroeconomic indices in the second quarter of 2018 and concluded
that the Nigerian economy seems to have lost the little recovery it made, since
exiting recession in Q2 2017 and that the economy is now struggling.
