Rewane projects Nigeria’s headline inflation to hit 44.51%

Bismarck Rewane, the managing director of Financial Derivatives Company has stressed for the need for the National Bureau of Statistics (NBS) to reconstruct Nigeria’s inflation calculation.

He noted that the current food and non-food inflation figures do not reflect the economic realities in Nigeria.

He made this assertion at the July 2022 briefing captioned: “Analysts Bemused, Markets Confused and Speculators Amused”, on Thursday.

The economist also projected Nigeria’s headline inflation to hit 44.51 percent if NBS reconstructs the current basket of goods for measuring inflation.

NBS most recent inflation report in May stood at 17.17 percent.

“The weights of the components in the basket for evaluating the periodic Consumer Price Index (CPI) ought to be reviewed every five years to reflect the changing households’ consumption patterns especially in the face of COVID 19 which altered spending patterns as well as Nigeria’s changing demographics,” he argued

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Rewane further listed inflation drivers in Nigeria to include diesel and aviation fuel as diesel price alone has surged by 229.99 percent in the last twelve months.

He also revealed a 25.51 percent growth in broad money supply, exchange rate pass-through which resulted in naira depreciation to the tune of 22.11 percent during the same period, as well as the seasonality effects.

The naira currently trades at about N610/$ at the parallel market and N415.83 at the official I & E window.

“Broad money supply maintained its upward trend. FAAC disbursement down 9.51% to N656.6bn in May despite higher oil prices. Zero remittance from NNPC due to petrol subsidy payments. And higher energy costs are causing structural shift in demand”, Rewane said.

The FDC’s proposed basket has a weighted average assigned to each of the components in the basket, with each weighted average reflecting the economic realities of Nigeria today, according to Rewane.

“Food and non-alcoholic beverages was assigned a weighted average of 55.54 percent in the FDC’s basket in contrast to its current weighted average of 51.8 percent. Housing, water, electricity and gas was assigned a weighted average of 10.72 percent by FDC compared with its current weighted average of 16.734.

Clothing and footwear was assigned 4.53 percent weight average compared with 7.65 percent currently.

“Transport got 6.04 weighted average as against 6.508 percent currently; furnishing, household equipment was assigned 2.83 percent by FDC as against 5.03 percent currently, while education and health got 6.04 percent and 6.52 percent as against 3.944 percent and 3.004 percent currently respectively,” he added

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