Experts proffer solution as Nigeria’s inflation rate heads to 7-month high

Financial experts have raised the alarm over Nigeria’s rising inflation rate which is set to hit a seven-month high, advising the Central Bank of Nigeria to start tightening the cycle by raising the baseline interest rate in response to the spiraling inflationary trend.

The National Bureau of Statistics (NBS) is scheduled to release the April 2022 inflation rate ahead of the meeting of the CBN’s Monetary Policy Committee (MPC) on May 23 and 24, 2022.

According to analysts, global inflation is at record levels with a four-decade high in the U.S. and three-decade high in the United Kingdom and European Union (EU), and the spiraling upward trend may continue in Nigeria and other Sub-Saharan African countries.

They argued that the spiraling inflationary trend would continue, and the third consecutive increase expected for April would be a game-changer for the apex bank.

READ ALSO: Nigeria’s inflation rate rises to 5-month high in March 2022

According to analysts, the implications of higher interest rates on cost of borrowing, return on savings and stock market valuations are already causing some jitters in money and capital markets.

Afrinvest, a major finance and investment group, said the proposed increase in tariffs by telecommunication operators would have a spiral inflationary effect on the general economy if implemented, given the strategic nature of telco services to business and households existence.

It stated that while the underlying business rationale may be compelling enough given that the average retail price of Diesel had surged by more than 129 per cent, Nigerians should brace up for higher inflationary trend amid declining purchasing power.

In a report, Financial Derivatives Company (FDC)- a high-level think-tank led by Bismarck Rewane, a member of President Muhammadu Buhari’s Economic Advisory Council, stated that its independent survey indicated that inflation rate may rise to 16.2 per cent for April 2022, 0.28 per cent ahead of 15.92 per cent announced for March 2022.

According to FDC, all inflation sub-indices except for month-on-month inflation are expected to increase with headline inflation.

Analysts at Cordros Group underlined that global monetary authorities are expected to further increase interest rates, which may have a colouration and softening effect on other economies.

FDC stated that Nigeria’s inflationary trend may be worse than estimated noting that whilst official headline inflation was reported at 15.92 per cent for March 2022, the actual reality of things painted a much higher number.

FDC noted that most African countries are grappling with the twin shock of rising inflation and high debt levels and according to the Standard Bank Group, five of Africa’s heavily-indebted countries-Ghana, Kenya, Angola, Ethiopia and Zambia, are at the verge of a debt distress.