Inflation may drop to 34.5% in December – Report

 Nigeria’s headline inflation rate may drop by 25 basis points to 34.5 per cent in December 2024.

In a report by Afrinvest Research on Saturday, this moderation is attributed to the high base year impact on the food inflation sub-basket and a further recovery in the exchange rate, with the naira expected to strengthen to below N1,600/$ levels.

The National Bureau of Statistics had earlier reported that the headline inflation rate for November increased by 70 basis points to 34.6 per cent year-on-year, marking the highest rate in over two decades.

On a month-on-month basis, the rate remained unchanged at 2.6 per cent, bringing the year-to-date average monthly inflation to 2.5 per cent.

This is higher than the 1.8 per cent projection by the Federal Government, which implies an annualised inflation rate of 33.0 per cent, compared to the FG’s target of 21.4 per cent.

The latest report by Afrinvest stated that food inflation drove much of the increase, rising by 77 basis points to 39.9 per cent year-on-year, the highest in five months.

On a month-on-month basis, food inflation inched up by four basis points to 2.98 per cent. The rise was attributed to poor main harvests due to flooding that destroyed over 700,000 hectares of cropland in 31 states, coupled with persistent insecurity and weak mechanisation in the agricultural sector.

Core inflation, which excludes volatile items like food and energy, also peaked at 28.8 per cent year-on-year in November, the highest in over two decades.

However, on a month-on-month basis, the core inflation rate eased by 30 basis points to 1.8 per cent, the lowest since December 2023.

This moderation was linked to a 3.8 per cent month-on-month decline in average PMS (petrol) prices, which stood at N1,140 per litre, and a recovery in the naira exchange rate to N1,672.69/$ and N1,720.00/$ in the official and parallel markets, respectively.

The transportation and communication sectors also saw slower price increases in November, rising by 18.5 percentage points and 0.4 percentage points, compared to 20.1 percentage points and 0.8 percentage points in October.

For the full year, the headline inflation rate is expected to average 33.1 per cent, surpassing the Federal Government’s projection by 11.7 percentage points.

Experts highlight the need for sustained policy measures to address inflationary pressures and stabilise the economy.

The PUNCH reported that Nigeria’s inflation rose to 34.60 per cent in November 2024, reflecting a 0.72 per cent increase from October’s rate of 33.88 per cent.