Amid CBN Monetary Tightening Inflation To Hit Record High Of 21.03%– CAPE

CAPE Economic Research & Consulting is projecting that inflation will not abate despite the monetary tightening stance of the Central Bank of Nigeria.

The Research firm said in its outlook that inflation may worsen to a record high of 21.03 per cent in a pessimistic scenario and 20.93 per cent in a more optimistic scenario.

Inflation rose to the highest level since September 2005 when the National Bureau of Statistics published 20.77 percent year-on-year inflation in September 2022.

NBS had put inflation at 20.52 per cent in August 2022.

The CBN has been struggling to tackle inflation and has increased the monetary policy rate to 15.5 per cent, a move it believes will curb inflation.

The CBN moved the benchmark lending rate from 11.5 per cent in September 2020 to 14 per cent in July 2022.

When Emefiele assumed office in March 2014, his target was to reduce inflation to a single digit.

“Our forecast showed that inflationary pressure would remain heightened in October 2022. Inflation would range between 20.93 percent in an optimistic scenario to 21.03 percent in a pessimistic scenario,” CAPE said.

“The key drivers of the inflation forecast remained food prices, transportation, and the exchange rate which contributes 4.61 percent, 0.48 percent, and 0.32 percent, respectively.”

But CAPE said the country’s economy will continue on a growth trajectory despite headwinds.

In the second quarter of 2022, Nigeria’s GDP stood at N45trn with a growth rate of 3.54 per cent against the Q1 growth rate of 3.11 per cent.

“Amid multiple headwinds including high energy prices, large-scale flooding, deteriorating foreign exchange rate, infrastructural deficit, structural bottlenecks, widening infrastructural deficit, and elevated cost of production, output growth is expected to remain on its positive path in Q3 and Q4 2022,” the firm projected.

CAPE said the growth will be propelled by expansion of aggregate demand driven by the upscale in election-related spending and activities ahead of the voting in 2023

The firm also said festivities-induced activities and spending will boost the Q4 2022 GDP.