Analysts at United Capital Plc have projected that the headline inflation figure in the country will remain elevated in the months to come due to the effect of the border closure on food index.
In its inflation outlook, the analysts at the investment banking group said the country should expect negative pressure on headline inflation in October.
United Capital inflation projections were a sequel to the publication of the latest data by the National Bureau of Statistics (NBS), showing headline inflation at 11.24 percent in September against 11.02 percent in the previous month of August.
"For the month of Oct-19, like what we saw in Sept-19, we expect negative pressure on headline inflation to remain elevated, emanating from the border closure, given the recent announcement to close all land borders, restricting all goods, imported and exported."
They said despite the ongoing harvest and distribution season, year-on-year food inflation is expected to increase, considering the effect of the full border closure on food imports.
It said core inflation, which has remained relatively stable due to continued petrol price regulation, is expected to rise due to the recent disbursement in terms of government spending, which will have direct impacts on consumption spending.
"Overall, month-on-month and y/y headline inflation should increase by 1.1 percent and 11.6 percent respectively buoyed by lower-base effect," analysts at the United Capital said.
Outlook for the rest of the year, according to the investment banking analysts showed that upward pressures might still exist on the inflation rate, as the re-opening of the border remains bleak in the near term, until a deal is reached between the Nigerian government and its neighboring countries.
Outlook for the rest of the year, according to the investment banking analysts showed that upward pressures might still exist on the inflation rate, as the re-opening of the border remains bleak in the near term, until a deal is reached between the Nigerian government and its neighboring countries.
It said the approval of 600 billion naira capital spending by the FGN in Q4-19, coupled with the approaching festive season, could mount additional pressure.
"Therefore, we estimate headline inflation to average about 11.8 percent in Q4-19. Looking into 2020, we believe further pressures remain on the horizon, with the possible implementation of the minimum wage, VAT increases, and upward review of energy tariffs."
The company attributed the spike in headline inflation in September to the impact of border closure, which it said played out in full on the food inflation sub-index as the highest increases in the segment were recorded on items that are imported/smuggled (cereals and fish) through the partially locked border.
According to the research and investment banking firm, the scarcity of these products as a result of the partial border closure and the inability of local producers to satisfy gross domestic demands must have pressured prices higher.
"On the other hand, despite continued stability in FX rates and energy prices, pressure on core inflation sub-index resurfaced as liquidity level was largely buoyant during the period."
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