By Nkiruka Nnorom
IF analysts’ projections are anything to go by, the recent reversal in the inflationary developments in the economy towards uptick is set to be sustained not just in December 2018 but way into 2019.
Inflation numbers had, in November, reversed its 18 consecutive month of steady decline, and inched up instead.
Now investment experts are projecting further spike in inflation figures for the month of December, 2018 owing to seasonal spending associated with yuletide periods as well as political spending ahead of the 2019 general elections.
Accordingly, analysts at Cordros Capital, a Lagos-based investment banking firm, put the December 2018 figure at 13.08 percent, while their counterparts at United Capital Plc, another investment banking firm, see the inflation figure at 11.55 percent.
Data released by the National Bureau of Statistics, (NBS) last week showed that inflation moved slightly higher in November at 11.28 percent year-on-year (YoY) against 11.26 percent YoY in the previous month.
According to analysts at Cordros Capital, the implementation of the new minimum wage scheme being canvassed by the labour union in the country, as well as pressure on prices in electricity and Petroleum Motor Spirit, PMS, are potential risks that will result in further uptrend in inflationary figure in 2019.
In a report themed: “Mounting risks set to test inflationary resilience in 2019,” they said that currency devaluation will also pose a threat to inflation, even as they forecast further rise to 13.08 percent at the end of the year.
They said: “Largely reflecting subsequent decline in demand for farm produce following the front-loaded increase in November, we expect month-on-month (MoM) food inflation to moderate slightly in December. Similarly, on account of sustained naira liquidity and stability, together with Nigeria National Petroleum Corporation, NNPC’s aggressive stance on PMS supply, we expect m/m core inflation to remain largely subdued. Overall, we look for December and 2018 mean MoM headline inflation of 0.70 percent and 0.90 percent, translating to YoY figures of 11.40 percent and 12.1 percent respectively
“Farther out, we reiterate the implementation of the new minimum wage, currency devaluation, as well as PMS and electricity price hikes, as notable upside risks to inflation in 2019, with year-end forecast of 13.08 percent YoY.”
Cowry Asset Management said it also expects upward pressure on general price level of goods and services as presidential election campaigns intensify, along with the usual increase spending in yuletide season.
United Capital Plc in its inflation outlook said: “We expect the pressure on food inflation sub-index to be sustained into December 2018, albeit marginally, as we anticipate increases in the supply of food items during the month to be outweighed by demand, especially as we move deeper into the festive season.
“Thus, we expect MoM food inflation to rise slightly by 0.95 percent in Dec-18. Elsewhere, campaign-related spending and the likelihood of a sustained volatility in the currency market remains the major downside risk to core inflation. In line with this, we expect the m/m core inflation sub-index to track marginally higher to 0.70 percent in Dec-18. On a balance of these factors, we expect m/m headline inflation to average 0.83 percent pressuring YoY inflation sharply higher to 11.55 percent in Dec-18.”