Report: Floods to Trigger Continuous Rise in Inflation Through 2022

Nume Ekeghe

Following the massive flooding that raved several states in the country, analysts have predicted that the impact will further worsen the inflationary pressure in the country between now and the rest of the year.

Financial Derivatives stated this in its economic bulletin released recently where it projected that inflation would spike to 21.32 per cent for the month of October.

The report stated that the inflation rate is likely to remain elevated throughout the year as the impact of floods overshadows the benefit of harvests.

According to the report, “Based on our econometric model and market survey in Lagos and its environs, Nigeria’s headline inflation is projected to increase again by 0.55 per cent to 21.32 per cent in October. Food inflation will rise by 0.62 per cent to 23.95 per cent, while core inflation will increase by 0.18 per cent to 20.5 per cent. If our estimates are accurate, it will be the ninth consecutive monthly increase and the highest rate of inflation in 17 years.”

It added that in contrast to the general expectation that harvest would drive down market prices, the food basket experienced a faster rate of price acceleration and that it can be attributed to the significant shortage in the supply of agricultural products as a result of the floods that ravaged major food-producing states.

“Furthermore, the interaction of higher logistic costs and the exchange rate pass-through effect is keeping the price of the non-food basket above reach. More so, we expect month-on- month inflation to increase by 0.8 per cent to 2.16 per cent as the effect of floods outweighs the benefit of the typical harvest season in the month of October.

“The impact of the floods that swept more than 26 states under water will continue to undermine the positive impact of the harvest period. Typically, Nigerian headline inflation and food inflation taper from September to November every year, reflecting the core harvests that occur in the period. However, the recent floods in the major food-producing states will rob the country of the price- moderation effects of the harvest season. This, coupled with higher logistics costs that have been exacerbated by the resurfaced fuel scarcity in the major cities, will keep food inflation elevated in the coming months. Food inflation has maintained an upward trend since January. It has increased by 6.21 per cent in the last ten months, “it stated.