The inflation rate has been projected to stand at 2.69 per cent Month on Month, resulting in a Year on Year increase of 107bps to 32.77 per cent.
The increase is hinged on the predictions that harvest depletion would sustain price pressures within the food basket, leading to an MoM increase of 3.29 per cent for food inflation.
According to Codros Capital Research, headline inflation remained elevated, rising by 180bps to 31.70 per cent YoY in February (January: 29.90.per cent YoY), occasioned by increased consumer prices on the back of low food supply relative to demand, lingering currency pressures, and higher energy prices, amid the unfavorable base effects from the prior year.
“We highlight broad-based pressures across the food and core baskets. Precisely, food inflation (+251bps to 37.92 per cent y/y) remained at a 19-year high, while the core inflation (+154bps to 25.13 per cent y/y) settled at the highest level since March 2004 (32.60 per cent y/y). On a month-on-month basis, consumer prices surged by 48bps to 3.12 per cent (January: +2.64 percent m/m), the highest point in 6 months.
“On our outlook, we identify the CBN’s efforts to stabilize the naira, recognizing the high pass-through effect on domestic prices. These efforts include improved dollar supply from the CBN to the forex market, monetary tightening, and higher domestic interest rates. ”
Based on the aforementioned, the experts predicted a less volatile naira this month, compared to previous months, thus moderating the impact of currency volatility on price increases in March.
Consequently, the analysts forecasted core inflation to print lower by 10bps to 1.98.percent MoM in March.
However, they expected harvest depletion to sustain price pressures within the food basket, leading to a MoM increase of 3.29.per cent for food inflation. “Broadly, we forecast headline inflation to print at 2.69 per cent MoM, resulting in a YoY increase of 107bps to 32.77 per cent.”
The recently released data by the National Bureau of Statistics (NBS) indicated that collections from the company Income Tax (CIT) increased by 49.9 percent YoY to N1.13 trillion in Q4, 2023 (Q4, 2022 N753.88 billion), bringing the total CIT collection to N4.90 trillion in 2023 full year (FY) (2022FY, N2.83 trillion), the experts noted that the increase was due to broad-based growth across foreign CIT payments (+49.0 YoY to N596.10 billion) and local collections (+50.9 percent YoY to N533.93 billion), in addition to currency depreciation which also supported the substantial increase in foreign collections.
However, the expert noted that the CIT collection declined by 35.4 percent on a quarter-on-quarter basis in Q4, 23 (against Q3, 2023: +13.0 per cent q/q to N1.75 trillion) due to the impact of a weak macroeconomy on corporate earnings.
They added:” Looking ahead, we expect CIT collections to increase in the near term in line with the tax provisions of the 2023 Finance Act and Fiscal Policy measures.
“Notwithstanding, we anticipate key risks including FX illiquidity, weak consumer demand, and high energy costs which could potentially weaken corporate earnings and CIT collections over the short to medium term.”
