Inflation hike: This is just the beginning, yet to reflect impact of policy changes – Rewane

The rise in flatiron to a 18-year high has been described as just the beginning. Bismarck Rewane, Chief Executive Officer (CEO) of Financial Derivatives Company (FDC) limited said this is because, the inflation numbers are yet to reflect the full impact of the policy changes.
He also added:”This is because of consumer price resistance and inventory build-up before the policy pronouncements. As inventory levels reduce and manufacturers begin the re-ordering process, the full impact of the policy change will be more apparent.
“Furthermore, the exchange rate for computing import duty has been adjusted by 83 per cent to N770/$ from N422.3/$. This will lead to an increase in the price of imported commodities”, Rewane said.
Other analysts in supporting Rewane’ s position said, there appears, more is still on the pipeline as petrol marketers yesterday adjust the pump price to N617 per litre.
Godwin Okorie said, inflation may be heading the way of Zimbabwe under Robert Mugabe, when it became galloping inflation.
Rewane in the latest FDC publication further explain that, “what is more striking is the fact that month-on-month inflation rose to 2.13 per cent from 1.94 per cent in May (when annualized – 28 per cent), which means that July inflation is likely to increase at a much faster pace”.
“The inflation report released is consistent with FDC’s forecast of 22.8 per cent. Nigerian inflation has reached an 18-year high of 22.79 per cent. Prices increased across board, both in the food and non-food baskets, largely because of seasonality (planting season) and the initial disruptive effects of the fuel subsidy removal and exchange rate unification”, said Rewane.
According to the publication, also noteworthy is the fact that core inflation (inflation less seasonalities) increased by 0.21 per cent to 20.27 per cent in June, confirming the notion that Nigerian inflation has both structural and transient components.
It took three years of constant increases in policy rate by the U.S. Fed (with all its financial weaponry) to bring down inflation from its peak of 9.1 per cent in June 2022 to three per cent in June 2023. Therefore, bringing inflation under control in Nigeria will be a long and hard journey.
“The MPC has been resolute in its statements about maintaining a tightening stance, but in reality, monetary conditions have been loose as effective rates of interest have been declining. The difference between inflation and effective interest rates has widened to 1700 bps. In the current dispensation, the CBN and the Debt Management Office (DMO) will have no alternative but to allow effective interest rates to rise sharply”, he said.

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