THE Central Bank of Nigeria’s (CBN’s) communication on inflation expectations, ‘Significantly’ affects inflation according to a recent survey by the bank.
The Central Bank of Nigeria (CBN) Inflation Expectations Survey (IES) for August 2024 was conducted from August 12-16, 2024, among selected businesses and households with a sample of 1,600 and 1,650, respectively, in the 36 states of the federation and the Federal Capital Territory.
The percentage of respondents according to the survey rose from 36.8 percent in July to 38.0 in August 2024, just as the percentage of those who said that CBN communication ‘Somewhat’ affects inflation expectation remained the same with July
2024, while the percentage of respondents who believed that CBN communication does not affect inflation expectations dropped from 9.8 percent in July 2024 to 8.6 in August 2024.
Similarly, Households’ and Businesses that closely follow-up on CBN’s announcements increased from 66.1 percent in July to 66.6 percent in August 2024.
Also, respondents that never follow up on CBN’s announcements increased from 1.1 percent to 1.4 percent while those that follow up on CBN announcements occasionally decreased from 32.7 percent in July to 32.8 percent in August 2024. Perceptions on transparency of CBN’s communication showed that majority of the respondents believed that CBN is transparent in its communication (86.4%). However, the IES aims to gather insights on how businesses and households perceive current and future inflation trends and the major drivers of inflation.
By understanding how people anticipate changes in the cost of goods and services, monetary policy can be better managed to stabilise the economy and promote growth.
The overall perception on inflation rate in the current month showed that 84.9 percent of the respondents were of the view that the current level of inflation was too high, culminating to an index of -63.2 points.
A breakdown of the responses indicates that businesses (-61.2 points) are slightly more optimistic than households (-65.2 points). A further breakdown shows that the micro businesses showed least pessimism with -58.2 index points.
According to the survey, business and household respondents believe that the current inflation rate is high. However, they expect the rate to decrease gradually over six months.
In line with their expectation of the inflation rate, respondents anticipate increased expenditure this month and the next three months. However, they expect a decline in spending in the next six months.
Most respondents believed that changes in the price of energy, exchange rate and transportation were the major drivers of inflation expectations during the reviewed periods, while majority of the respondents preferred that the CBN decrease the interest rate.
In line with the perception on inflation, respondents opined that their expenditure increased in the current month, as indicated by a positive index of 35.4 points. Businesses expressed a significantly higher level of increased expenditure with an index of 45.5 compared to households that recorded 24.7 index points.
The inflation rate in Nigeria for August 2024 should marginally moderate by 1.00 per cent on a month-on-month basis to 32.40 per cent from the 33.40 per cent recorded in July 2024, analysts at Meristem Research have predicted.
The agency is expected to release the numbers for last month in the coming days, and for those at Meristem Research, the rise in the price of premium motor spirit (PMS), otherwise known as petrol, may not cause another jump in inflation despite consumers unable to purchase the product with ease in the period under review.
In September 2024, the Nigerian National Petroleum Company (NNPC) Limited unofficially increased the pump price from N568 per litre to N855 per litre, while some independent oil marketers sell between N1,000 per litre and N1,200 per litre in Lagos.
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