By ADA Samson, Abuja
A new report suggests that Nigeria’s inflation rate is on track to fall for the fifth month in a row, offering a sign of relief for households and businesses. This continued slowdown is being driven by a more stable Nigerian currency and successful harvests, which are helping to lower the cost of goods.
The analysis, from Coronation Asset Management, comes as the National Bureau of Statistics prepares to release the official inflation figures for August. It is widely expected that the data will confirm this downward trend.
In July, the inflation rate fell to 21.88%, marking the fourth consecutive monthly drop. This is a significant improvement compared to the same time last year, when the rate was as high as 33.40%. The report projects that August’s headline inflation will ease further to approximately 21.45%.
A major factor behind this positive development is the performance of the naira. The currency closed slightly stronger against the US dollar in August, and this stability has made imported goods and raw materials less expensive. This is particularly important for items like processed foods and packaged goods, whose prices are now rising more slowly.
Furthermore, the current harvest season is playing a crucial role. Increased supplies of staple foods such as maize, groundnuts, and vegetables from farms in the southern and middle-belt regions are helping to ease the pressure on food prices. This has led to a moderation in food inflation, with the monthly increase in food costs slowing down in July.
Another area showing improvement is core inflation, which excludes volatile food and energy prices. This also slowed in July, indicating that broader price pressures across the economy are beginning to ease.
The report also highlighted that Nigeria’s foreign exchange reserves grew by nearly $2 billion in August, reaching $41.27 billion. This stronger reserve position has given the Central Bank of Nigeria more capacity to support the naira and maintain stability in the currency market.
However, the report also sounded a note of caution, pointing to potential risks that could disrupt this progress in September. A disagreement between the Dangote Refinery and a petroleum workers’ union could potentially affect fuel supply and push energy prices higher. Additionally, anticipated seasonal flooding might damage farmland and disrupt transportation, leading to renewed pressure on food prices.
Separately, analysts at AIICO Capital have suggested that if the decline in inflation continues, it could encourage the Central Bank’s Monetary Policy Committee to consider cutting interest rates at its next meeting later this month. This would be a welcome move for borrowers and could stimulate further economic activity.
Overall, while challenges remain, the latest analysis points to a cautiously optimistic trend as key economic indicators appear to be moving in the right direction.
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