The Economic Intelligence Group (EIG) of Access Bank believes that the National Bureau of Statistics (NBS) inflation data for July will show that the purchasing power of the naira has dropped further.
The EIG is forecasting that inflation, which shows average rise in the price of goods and services, will hit 17.2% in July. This basically means that an average purchasing power of the naira has dropped by 17.2% in the last one year, an indication that Nigerians are getting poorer.
The EIG lists the major reasons that drove the rise in the prices of goods and services in July. These include;
A rise in the prices of food and non-food items which has largely led to a higher cost of living by Nigerians. Rise in the prices of food items has had the most impact on inflation according to the EIG.
“The uptick in prices from items such as fish, meat, vegetables and bread on the back of higher transportation and distribution cost will push inflation rate for the month of July higher.”
The EIG also notes that the non-food inflation or rather the core inflation index “should also inch up slightly due to cost push factors on the back of continued depreciation of the Naira.”
The EIG notes that the naira has depreciated by more than 28% against the US$ in the interbank and parallel market over the levels in June. This is expected to impact on the prices of imported items such as motor car and vehicle spare parts. Increases in cost of passenger transport by air will further drive the core index higher.
“The nation’s reliance on imports of raw materials, refined products and consumer goods implies that a weaker naira will compound the effect of imported inflation.”
The EIG expects that the rise in inflation will push returns on financial assets into negative territory. This simply implies those that have bank deposits and are receiving interest rates of less than the inflation rate are losing money. The NBS is expected to release its inflation data for July in the next few days.
