Analysts warned that with inflation risks still tilted upward due to high energy prices and supply disruptions, further Central Bank of Nigeria tightening could slow private sector expansion and weigh on investment and productivity growth.
They said that inflation is expected to remain on an uptrend, primarily due to elevated petroleum prices and tight food supplies, given the ongoing planting season and persistent insecurity in food-producing areas.
Besides, they cautioned that the persistence of elevated energy prices and related supply disruptions to keep oil prices high, sustaining the passthrough effect on food and core inflationary pressures reinforces expectations that the monetary authority will keep interest rates unchanged for longer, while also raising the risk of further monetary tightening if price pressures become more broad based and durable.
According to the National Bureau of Statistics (NBS), headline inflation rose for the second consecutive month, increasing by 31bps to 15.69% y/y in April (March: 15.38% y/y).
The sustained increase primarily reflects the continued pass-through effect of elevated energy prices on broader consumer prices.
The food inflation increased by 176bps to 16.06% y/y (March: 14.31% y/y), primarily driven by a sustained upward pressure on food prices due to constrained supply conditions following the ongoing planting season, alongside elevated logistics costs driven by the spike in energy prices.
However, core inflation moderated by 35bps to 15.86% y/y in April (March: 16.21% y/y), reflecting slower increases in energy and transportation costs following the spike recorded in March. On a month-on-month basis, headline inflation rose moderately by 2.13% (March: +4.18% m/m).
Cordros securities researchers in their weekly economic and market report, noted that inflation is expected to remain on an uptrend, primarily due to elevated petroleum prices and tight food supplies, given the ongoing planting season and persistent insecurity in food-producing areas.
“Although the relative stability of the naira should help limit imported inflation pressures, its disinflationary impact is likely to be partly offset by high energy costs and persistent food supply constraints. “According settle at 2.00% m/m in May, cascadly, we forecast headline inflation to ing to a y/y print of 16.22%”.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), told Daily Independent that the current geopolitical tensions involving Iran, Israel and the United States are also intensifying inflationary risks
The conflict has triggered renewed volatility in the global oil market, pushing up crude oil prices and transmitting higher energy costs into the domestic economy.
Rising petrol, diesel and gas prices are fueling transportation, logistics and production costs across sectors, with significant pass-through effects on food prices and overall consumer inflation.
This further underscores the structural and supply-side nature of Nigeria’s inflation challenge. Monetary tightening alone cannot resolve inflation driven by energy costs, logistics inefficiencies, food supply disruptions and weak infrastructure conditions. Additional monetary tightening could worsen financing costs for businesses, weaken investment and further constrain productivity growth.
The policy priority should therefore shift more decisively towards supply-side interventions
An executive director of a new generation bank, told Daily Independent that additional monetary tightening could worsen financing costs for businesses, weaken investment and further constrain productivity growth.
“Government at both federal and state levels should intensify measures to reduce energy costs, improve transportation infrastructure, strengthen food supply systems, enhance trade facilitation and support domestic productivity.
“For businesses, the operating environment remains extremely challenging. Firms should prioritize energy efficiency, dynamic pricing models, consumer segmentation and affordability-driven product strategies, including smaller pack sizes, as consumers become increasingly price-sensitive and discretionary spending weakens”
Mr Adewale Oyerinde, Director General of Nigeria Employers’ Consultative Association, NECA, told Daily Independent that the April inflation numbers suggest that while inflationary momentum may be moderating, the disinflation process remains highly vulnerable to external shocks, especially geopolitical developments in the global energy market.
Sustained inflation moderation will depend largely on structural reforms and targeted interventions to reduce the cost of food, transportation and energy within the economy.
“The policy priority should therefore shift more decisively towards supply-side interventions. Governments at both federal and state levels should intensify measures to reduce energy costs, improve transportation infrastructure, strengthen food supply systems, enhance trade facilitation and support domestic productivity”.
Auwal Musa Rafsanjani, the Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC) told Daily Independent that sustained inflation moderation will depend largely on structural reforms and targeted interventions to reduce the cost of food, transportation and energy within the economy.
“Government at both federal and state levels should intensify measures to reduce energy costs, improve transportation infrastructure, strengthen food supply systems, enhance trade facilitation and support domestic productivity”, he added.
SOURCE: Independent