Rewane: Petrol price reduction, naira stability to drive down inflation
Agency report
The Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) is expected to cut the Monetary Policy Rate (MPR), also referred to as the benchmark rate by 25 basis points when it meets next week, said Bismarck Rewane, Chief Executive of Financial Derivatives Company (FDC) Limited in its Economic Splash published weekend.
This is on the premise that the inflation rate will fall in the month of June.
“In a few days, Nigeria’s inflation numbers will be released. Based on our market survey and econometric model, inflation is expected to ease to 22.65 per cent in June, from 22.97 per cent.
“This forecast is driven by a combination of factors, including a N100 reduction in PMS price, relative stability in the naira exchange rate, and a decline in money supply growth”,
He said in spite of the trend, food inflation is expected to rise by 0.42 per cent to 21.56 per cent from 21.14 per cent. Core inflation (inflation less seasonalities), is projected to decline by 1.34 per cent to 20.94 per cent from 22.28 per cent.
Month-on-month inflation, which is a more recent reflection of price movements, is projected to rise by 0.46 per cent to 1.99 per cent in June (annualised at 26.75 per cent) from 1.53 per cent.
“The increase in monthly inflation is driven mainly by transient factors, including seasonal effects, flash floods in Mokwa – a key link between northern food-producing states and southern consuming states, and a possible decline in food imports following the expiration of import waivers. The inflation numbers could have been worse if not for the relative stability of the exchange rate”, said Rewane.
“The Monetary Policy Committee (MPC) will meet on July 21-22. In view of the current moderation in the inflation rate and exchange rate stability, a marginal reduction in the MPR by 25pbs appears to be the most likely outcome.
“This easing in the interest rate is reinforced by the latest forecast from the IMF, which anticipates inflation will decline in the fourth quarter of 2025 and further ease to 18 per cent in 2026. Additionally, in the primary treasury bills market, the Debt Management Office (DMO) recently reduced the stop rate of 365-day to 16.76 per cent per annum (p.a), down from 17.12 per annum p.a. in June this year” said Rewane.
