United Capital Plc’s Chief Economist, Ayodele Akinwunmi, has projected that Nigeria’s headline inflation rate will moderate to about 15.35 percent in July, supported by easing food and petroleum product prices.
Akinwunmi disclosed this while speaking on the outlook for Nigeria’s inflation ahead of the release of the July Consumer Price Index (CPI) by the National Bureau of Statistics (NBS).
According to him, food remains the largest contributor to inflation because of its significant weight in the Consumer Price Index and the substantial proportion of household income Nigerians spend on food.
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He explained that movements in food prices have a direct impact on headline inflation, noting that the moderation in some food prices recorded in July could contribute to a lower inflation reading for the month.
“Food is the major driver and that’s what we spend a lot of our money on. So, when you have a major increase in the prices of food items, consumer prices tend to go up,” he said.
Akinwunmi also pointed to lower tomato prices in July following the seasonal increase recorded in June as one of the factors expected to support the moderation in inflation.
He said the decline in crude oil prices during the month also translated into lower prices of petroleum products, including Premium Motor Spirit (PMS), diesel and aviation fuel.
According to him, lower fuel prices could have a broader effect on inflation by reducing transportation and logistics costs, which in turn could lower the cost of moving agricultural produce from farms to markets.
“Movement of those food items from the farmland to the market means that it will be cheaper,” he said. Akinwunmi’s 15.35 percent projection would represent a moderation from the 15.91 percent inflation rate recorded in June.
The United Capital economist said Nigerians could already feel some of the effects of the moderation in petroleum prices, pointing to reductions in PMS prices during July.
He explained that under Nigeria’s deregulated downstream petroleum market, changes in global crude oil prices can increasingly feed through to domestic fuel prices. He noted that this transmission mechanism could influence transportation and logistics costs and, ultimately, the prices of goods and services.
“Any little variation will be impacted in the price that you and I pay for it,” Akinwunmi said. He, however, noted that the increase in domestic refining capacity had helped cushion the impact of higher international crude oil prices on Nigeria’s economy.
Akinwunmi also advocated stronger local production, arguing that increasing domestic capacity would reduce Nigeria’s exposure to external economic shocks while supporting employment and moderating consumer prices.
He said Nigeria’s ability to produce more goods domestically would reduce dependence on imported products and make the economy more resilient to fluctuations in global commodity prices.
He also credited domestic refining for helping to strengthen the country’s resilience in the face of higher international crude oil prices.
According to him, increased crude oil revenues from higher global prices also provided support for the foreign exchange market, helping to cushion some of the inflationary pressures.
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He urged policymakers to continue supporting local businesses, entrepreneurs and domestic production to improve economic resilience and keep prices relatively moderate.
On the outlook for monetary policy, Akinwunmi said it was still too early to predict the decision of the Monetary Policy Committee (MPC) at its next meeting, noting that additional inflation data would be available before the meeting.
He suggested that the Central Bank of Nigeria could maintain the status quo, given the prevailing economic conditions and the need to assess further inflation and exchange-rate developments.
Akinwunmi stressed that sustained investment in local production, food supply and domestic refining would remain critical to Nigeria’s efforts to contain inflation and strengthen economic stability.
