Nigeria’s Inflation Rate to rise by 0.09% in April – Analysts

Manufacturers ramp up production of face masks

Cases of the Coronavirus disease surged past two million worldwide in the month of April. So far, Governments across territories have employed heterodox measures – shutting borders and suspending economic activities – in a bid to curtail a further spread of the virus.

The April 2020 inflation report by the National Bureau of Statistics (NBS) is expected to be released tomorrow, 15th of May 2020.

Ahead of the release, analysts at Meristem Securities Limited envisage an uptick in the headline inflation rate to 12.35%, from 12.26% reported in March 2020 in a mail to Brand Spur Nigeria.

“The April 2020 Inflation report by the National Bureau of Statistics (NBS) is expected to be
released on the 15th of May 2020. We envisage an uptick in the headline inflation rate to
12.35%, from 12.26% reported in March 2020”

On the account of panic buy, FX adjustment, analysts predict 12.35% inflation rate for April 2020.

For the most part of April, a large part of the world was on lockdown. However, in recent times, some countries are beginning to reopen, especially in the world’s largest market, where businesses are gradually resuming operations and consumption slowly gaining momentum.

To put this in context, export data from China shows a 3.5% growth YoY and a trade surplus of USD45.4bn in April- the largest since December 2019. The impressive export growth was spurred by the increasing global demand for medical supplies in the fight against the deadly disease.

The month of April was the most turbulent for the global oil market, as the Western Texas Intermediate (WTI) closed in sub-zero (-USD37/barrel) the territory at the futures market for the first time in history. As a result of lockdown measures put in place to curtail the spread of the COVID-19, global demands for oil plummeted, and oil storage facilities ran out.

Consequently, oil traders had to source for off-takers as it would have costed more to keep the commodity in storage. Ultimately, the fate of oil prices rebounding depends mainly on a pick up in global oil demand once lockdowns are lifted across regions and economies are restarted.

Panic Buying and Higher Input Costs Trigger Inflationary Pressures In the domestic economy, the extension of the lockdown in Lagos, Ogun and Oyo triggered a second wave of panic buying, causing a spike in the prices of foodstuff and household consumables.

Also, the impact of the technical adjustment in exchange rate in March, along with the reduced supply of foreign exchange by the CBN is expected to trickle into input costs of manufacturers and suppliers, which would further drive up the prices of goods and consequently, the CPI.

While we note the further reduction of PMS pump price to NGN123.50 from NGN125 in March, we expect it to have minimal impact on general price levels.

We also acknowledge the inflationary impact of precautionary measures taken by some governments (Germany, France, USA, India and Vietnam amongst others) to restrict the export of medical supplies and critical agricultural produce.

The export control could materialize into the scarcity of the restricted products in importing nations, lending further credence to our stance of a significant uptick in the CPI in April, as Nigeria remains an overly import-dependent nation.