Increase in petrol prices unlikely to affect food inflation- CardinalStone Research 

A new report by CardinalStone research has noted that the increase in petrol prices by the NNPC in the past few weeks is unlikely to affect food inflation in the country.

The firm stated this in a reaction to the NBS inflation report for August where it stated that the hike in petrol prices may affect core inflation.

According to the research report, logistics and transport in the agriculture value chain is mainly carried out using diesel powered vehicles hence higher prices of PMS would not affect food prices.

Furthermore, the firm noted that the decline in headline inflation in August was due to the moderation in food inflation caused by harvests by farmers mainly in the Southern parts of the country.

Also, the report stated that food inflation will decline further in September propelled mainly by full blown crop harvest in the month. It projected food inflation in September to reach 37.4% while core inflation was projected to rise to 27.8% from 27.6% in August 2024.

It stated, “On the food basket, we expect a sustained deceleration in September, supported by full-blown harvest season. Having adjusted our model for reported cases of flooding and lesser-than-average harvest in some states, we expect food inflation to decelerate by 11bps to 37.4%.”  

“Furthermore, the passthrough of higher PMS prices is unlikely to be pronounced on food inflation as most agro-machineries and trucks for logistics are mostly diesel-powered. Overall, we expect headline inflation to increase by 15bps to 32.3% in September 2024.” 

Backstory 

Nigeria’s inflation rate slowed for the second consecutive month in August to 32.15% from 33.40% in July 2024. This represents a deceleration of 125 basis points. Food inflation in August stood at 2.37%, reflecting a slight decrease of 0.10 percentage points from the 2.47% rate recorded in July 2024 according to data from the NBS.

• The NNPC in the past few weeks has increased petrol prices twice in what many analysts project could erode the gains of declining inflation rate across the country. Earlier in September, the company announced an increase in PMS prices from N617 to N897 in a move towards a more market reflective price.

• However, the increment has not gone down well with lots of Nigerians- the Nigerian Employers’ Cosultative Association (NECA) criticised the hike stating that Nigerians are being forced to pay for the inefficiencies of the NNPC while Manufacturers Association warned that many SMEs might be forced to shut down.

Following the commencement fof petrol supply from the Dangote refinery, the NNPC announced another price increase of petrol from the Dangote refinery which saw petrol prices in Lagos at N950 per litre while in some other states as high as N1,019.