Afrinvest Predicts 27.9% Inflation Rate for October 2023 Due to FX Depreciation

Afrinvest West Africa analysts are anticipating a further uptick in Nigeria’s headline inflation rate, forecasting a rise to 27.9% for October 2023.

The projection indicates a 102 basis points increase, primarily attributed to the depreciation of the foreign exchange rate.

The report emphasizes that food is expected to sustain its role as a major contributor to the Consumer Price Index (CPI) surge, propelled by heightened transportation costs for agricultural products.

Despite an increase in food supply due to the ongoing harvest season, the report underscores the considerable impact of rising fuel prices on core inflation.

The report outlines key solutions, including the need to manage the growth of the money supply.

It highlights a year-on-year increase of 40.3% in September 2023, significantly outpacing actual economic growth of 2.5% during the same period.

Fiscal spending is recommended to be directed more toward value-creating capital investments rather than consumption-focused recurrent needs.

Furthermore, the report advocates for the easing of restrictions on food imports as a short-term solution to address food supply challenges.

It suggests that reducing tariffs on food imports can provide immediate relief, while addressing long-term structural issues such as security, transportation, and logistics is crucial.

Regarding the equities market, the report expresses confidence that the Nigerian Exchange Group (NGX) is likely to maintain positive sentiment, given its performance relative to inflation rates from the beginning of the year until October. This positive outlook is expected to persist despite concerns about inflation.

Source: Nairametrics