Inflation is expected to edge higher in June despite easing energy costs, with analysts at Meristem Research forecasting that persistent food price pressures will outweigh the benefits of lower fuel prices and exchange rate stability.Â
Ahead of the National Bureau of Statistics’ (NBS) inflation release scheduled for Wednesday, Meristem projected headline inflation at 15.95 percent year-on-year in June, marginally above the 15.93 percent recorded in May.
The forecast suggests that while the disinflation trend remains intact, food prices continue to pose the biggest obstacle to a faster moderation in consumer inflation, reinforcing concerns over the pace of price stability in Africa’s largest economy.
Meristem said inflationary risks have also re-emerged globally following renewed tensions between the United States and Iran, a development that has pushed international oil prices higher after weeks of relative stability.
The research firm noted that much of June had been characterised by expectations of easing inflation following a ceasefire between the two countries, which helped soften crude oil prices. However, the renewed escalation in geopolitical tensions has reversed that trend, raising the prospect of fresh energy-related inflationary pressures across global markets.
Despite the renewed risks to energy prices, the firm expects Nigeria to benefit from improving food supply conditions in several producing regions and softer consumer demand, factors that should help limit further increases in food prices.
According to Meristem, core inflation is likely to moderate as the effects of lower domestic energy costs gradually filter through transportation, distribution and other production expenses.
The research house also expects month-on-month inflationary pressures to ease, supported by lower petrol prices, a relatively stable naira and the gradual transmission of reduced energy costs across supply chains.
“On a month-on-month basis, the combined effect of lower petrol prices, a relatively stable naira and the gradual pass-through of reduced energy costs across the supply chain should exert further downward pressure on inflation,” the report stated.
However, the firm cautioned that food inflation remains the principal variable shaping the near-term inflation outlook. Seasonal pre-harvest supply constraints, it said, are expected to offset some of the gains from declining logistics costs, limiting the pace of overall disinflation.
The forecast highlights the increasingly uneven nature of Nigeria’s inflation trajectory, where improvements in exchange rate stability and energy prices are providing relief to businesses and consumers, while structural challenges in food production and distribution continue to keep headline inflation elevated.
The June inflation report is expected to provide an important gauge of whether Nigeria’s disinflation process remains on track amid renewed geopolitical risks, volatile energy markets and lingering domestic food supply pressures.
