Some experts have predicted that Nigeria’s inflation rate may decelerate marginally in March after two consecutive rise.
The Chief Executive Officer of Financial Derivatives Company, Bismarck Rewane, said during a presentation titled ‘Global Tremor but No Contagion’ at the April Breakfast Meeting of the Lagos Business School that the inflation for March 2023 will drop marginally by 0.06 per cent to 21.85 per cent.
Rewane said, “Inflation will likely fall marginally by 0.06 per cent to 21.85 per cent in March due to exchange rate appreciation, base effects and reduction in transportation costs.”
The country’s inflation rate stood at 21.91 per cent in February, according to the National Bureau of Statistics.
In his presentation, Rewane projected that the core inflation rate would drop to 18.54 per cent from 18.84 per cent which the NBS disclosed for February 2023, while food inflation was expected to dip to 23.83 per cent, from 24.35 per cent.
However, he claimed that the monthly inflation rate was expected to remain flat at 1.71 per cent.
According to Rewane, inflation is largely driven by money supply growth, in this case, the integration of old and new naira notes to increase currency in circulation, the appreciation of the naira at the parallel market by 1.32 per cent to $/N745, also a significant decline had been recorded in diesel price, which dropped by 12.78 per cent to N710/per cent.
In his submission, Professor of Marketing and Faculty Director at Lagos Business School, Uchenna Uzo, agreed that the projected dip in inflation figure would be marginal and temporary.
He said, “I believe so, though it is going to be marginal for the very reasons he (Rewane) has given but also because you know that consumers now are sceptical of the banks’ ability to provide cash to them, given the cash crunch situation that we had. So, you are going to have people keeping the money that they have, not being willing to spend as before, waiting to see how the cash supply improves.
“That is going to reduce inflation to some extent, but when things normalise a bit more, we are likely to see inflation picking up again. But I think recovery, now that the elections are out of the way, is going to come in the next coming months, gradually, as we know the policy direction of the new administration and everybody is looking for stability after months of instability.”
Professor of Economics at Babcock University, Segun Ajibola, stated that the cash crunch in the country would be the cause of the dip in the inflation rate if it happened.
Ajibola said that March was a tough month for traders and suppliers, especially of perishable goods, as they had to sell below the cost price and this in turn would impact the inflation figure.
He called the possibility of the dip a disequilibrium that would be reversed when the economy stabilises.
“It was a tough month because of the impact of the insufficiency of cash in and around the economy. Traders and suppliers, especially of perishable commodities and commodities with very short shelf life had to sell off at highly discounted rates, some below cost, just to salvage what they could out of such produce.
“When people do not have cash, it is difficult for them to buy. To encourage people to part with the little cash that they had, the prices had to be brought down even in some cases below cost,” he noted.
Sharing his own experience on his farm, the economist revealed that he had to sell some of his farm produce at discounted rates, so they would not go bad.
“I am a living witness to the experience I had on my farm. Some produce were getting spoilt and some had to be disposed of at whatever price. It is not impossible for the inflation rate to come down but it will depend on the rate of the affected commodities. Everyone did not sell in desperation.
“If the rate eventually shows a downward trend, I doubt if it is sustainable. When the economy stabilises, when access to cash becomes fully guaranteed, we will be back to normalcy, back to the place of equilibrium. In April, and May, we will see a return to the full colour of the inflationary trend,” Ajibola asserted.
Meanwhile, Rewane, stated that the collapse of Silicon Valley Bank and Signature Bank in the United States of America would squeeze funding for fintech startups in Nigeria.
He said, “The SVB is a major financier of tech startups and venture capital in the United States of America. The collapse of SVB and the Signature Bank crisis will squeeze and restrain funding to fintech startups in Nigeria. Nigeria’s fintech space is likely to come under pressure.”
The collapse of the US banks had led to massive sell-offs of global banking stocks as investor jitters sent the market into turmoil.
According to Rewane, the total value of fintech startup funding by Venture Capital jumped to $536.7mn in 2021 from $20.9mn in 2015 before declining to $507mn in 2022.
