The National Bureau of Statistics (NBS) has reported a significant increase in headline inflation in Nigeria, rising by 180 basis points to 31.70% year-on-year in February, compared to January’s figure of 29.90% year-on-year. This surge in consumer prices is attributed to several factors including low food supply relative to demand, ongoing currency pressures, and higher energy prices, exacerbated by unfavorable base effects from the previous year.
Analysts point to broad-based pressures across both the food and core baskets. Food inflation surged by 251 basis points to reach 37.92% year-on-year, marking a 19-year high, while core inflation settled at 25.13% year-on-year, the highest level since March 2004.
On a month-on-month basis, consumer prices experienced a notable increase, rising by 48 basis points to 3.12%, the highest print in six months. Looking ahead, analysts are closely monitoring the Central Bank of Nigeria’s (CBN) efforts to stabilize the naira, recognizing the significant pass-through effect on domestic prices. These efforts include improved dollar supply to the Forex market, monetary tightening measures, and higher domestic interest rates.
Despite the expectation of reduced naira volatility, analysts forecast continued pressure within the food basket due to harvest depletion, projecting a month-on-month increase of 3.29% for food inflation. Overall, headline inflation is forecasted to print at 2.69% month-on-month, resulting in a year-on-year increase of 107 basis points to 32.77%.
In a separate report also released by the NBS, collections from Company Income Tax (CIT) saw a substantial increase, rising by 49.9% year-on-year to NGN1.13 trillion in Q4-23, compared to NGN753.88 billion in Q4-22, totaling NGN4.90 trillion for the entirety of 2023 fiscal year, up from NGN2.83 trillion in 2022. The increase was attributed to growth across both foreign CIT payments and local collections.
However, quarter-on-quarter, CIT collections experienced a decline of 35.4% in Q4-23, influenced by the weak macroeconomic landscape impacting corporate earnings. Looking ahead, analysts expect CIT collections to increase in the near term, driven by provisions of the 2023 Finance Act and Fiscal Policy measures. Nonetheless, key risks including FX illiquidity, weak consumer demand, and high energy costs pose potential threats to corporate earnings and CIT collections over the short to medium term.
