Nigeria’s inflation projected to drop in February

Nigeria's inflation rate is projected to drop in February, with expectations for a steeper decline to 14.75 per cent from the 15.13 per cent recorded in January. Damilola Akimbami, Head of Research at Financial Derivatives, explained that the analysis is based on a simple regression model and qualitative factors. The trend of declining inflation is expected to continue due to various reasons. In the food basket, prices are anticipated to keep falling, albeit at a slower pace, as the planting season begins. The core inflation, driven by stability in power supply and exchange rates, is also expected to decline. However, challenges like pre-election spending and potential energy price reviews pose risks to the outlook. Akimbami suggested that inflation may not reach single digits this year but could range between 14.5 to 14.7 per cent. She emphasized that the upcoming elections could fuel increased spending, leading to a rise in inflation levels. The risks surrounding agriculture, such as herdsman crises and security issues, also present challenges that could impact food inflation negatively. Moreover, the stalemate between the national assembly and the executive branch poses uncertainties for monetary policy decisions, with the possibility of a meeting to address interest rates. The last policy decision was made in July 2016, and there are growing calls for a more accommodative stance to stimulate economic growth and lending to the real sector. Despite the positive economic indicators, the looming risks highlight the need for cautious monitoring of inflation and policy responses.