Lagos – Some financial institutions have projected
inflation to increase in the coming months in the wake of the shortages of
foreign currency and if the fuel scarcity persists.
The negative projections follow reports from the National
Bureau of Statistics indicating inflation had risen to a four-year high of 12,8
percent year-on-year in March from 11,4 percent recorded in the previous month.
The main driver of this pick up was food inflation, which
accounts for the bulk of the basket, which climbed up to 12,7 percent.
The fuel scarcity was another cause, as noted by analysts.
“We continue to see further evidence of how the weakening of
the parallel market currency rate is feeding into the inflation numbers,” said
Rand Merchant Bank (RMB) on Wednesday.
Also read: Boko Haram, drought fuel inflation
“Moreover, the fuel shortages that have gripped the economy
are acting as a drag on the economy by adding an additional layer of costs to
First Bank of Nigeria (FBN) concurred.
“Fuel shortages were another reason for the poor inflation
report,” FBN states also on Wednesday.
RMB was doubtful the Central Bank of Nigeria would succeed
in lowering the inflation rate owing to the shortages of foreign currency and
fuel in the official markets.
“As local businesses are increasingly turning to the
parallel market for both US dollars and fuel, it seems unlikely that the
inflation rate could come down to the Central Bank of Nigeria’s upper limit of
9 percent,” RMB stated.
FBN was also downbeat.
“The fx (foreign currency) shortages are set to continue in
the months ahead, which points to more depressing inflation reports and,
perhaps, more monetary tightening.”
- CAJ News