FSDH Merchant Bank has projected inflation rate of 13 percent for 2019 fiscal year citing implementation of the new minimum wage, upward review of electricity tariff and likely removal of fuel subsidy as factors that will drive up prices next year.

This company’s projection however is in contrast to the 11.4 percent projected by the Central Bank of Nigeria of Nigeria (CBN) for 2019.

While delivering the keynote address at the annual Bankers Dinner of the Chartered Institute of Nigeria (CIBN), CBN Governor, Mr. Godwin Emefiele said: “Inflation expectations are rising on the backdrop of anticipated politically-related liquidity injections.

For the rest of 2018 and towards mid-2019 Nigeria’s rate of inflation is projected to rise slightly to about 11.4 percent and then moderate thereafter.”

Commenting on this projection at the media presentation of the December edition of the company’s monthly economic and financial markets outlook, titled “Will Crude Oil Market Receive the Required Stimulus?”, Head of Research, FSDH Merchant Bank, Mr. Ayo Akinwunmi said: “11.4 percent is not what our projection is for next year.

From June next year we expect 13 percent inflation.”

Speaking further, Akinwunmi explained: “The implementation of the minimum wage will add a lot of money to the money that the federal government and state government will spend.

This will increase the budget of the FG. It will increase the operating expenses of the FG next year. “Our projection is that the electricity tariff has no other I direction to go than to go upward next year.

This is because the parameters that they used to do the current tariff, namely inflation rate, exchange rate and gas price, have changed. Operators are not operating at a profit.

The tariff does not reflect the cost. FG keeps on pumping money there but they will not have money to pump in next year. So they will adjust the tariff to reflect cost and then to add little bit of profit margin. That is inflationary on its own. “There is no way FG will sustain fuel subsidy next year. There is an ultimatum now, which fuel marketers issued on Sunday, they gave seven days ultimatum for payment of N800 billion debts. Where is government going to get that? They also said that the FG will also pay them for exchange rate differentials. And this time is very timely because this festive period and election period. So these three things will raise prices next year.”

Furthermore, Akinwunmi said FSDH is projecting a moderate rise in November inflation rate to 11.28 due to impact of year year end sales. He said: “ The inflation rate dropped to 11.26 percent in October, following two consecutive months of increase.

A deceleration in food prices drove down the inflation rate in October. FSDH Research forecasts that the inflation rate for November 2018 will inch up to 11.28 percent as a result of the impacts of end of year purchases.

 

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