PwC Nigeria has said the headline inflation in Nigeria will average 12.2 per cent in 2020, compared to 11.4 per cent last year.
The firm said this on Monday in a new report titled ‘Demand and supply shocks from COVID-19 keep inflation higher for longer’.
It noted that headline inflation rose by 12.4 per cent year-on-year in May, the highest in 26 months, from 12.3 per cent in April, citing figures from the National Bureau of Statistics.
The report said barring a second wave of the COVID-19 pandemic, coupled with the absence of major shocks of food supply in Nigeria, inflation outlook for the rest of the year could be influenced by two factors.
“Firstly, the elevated base effect, and secondly, waning household incomes. The first factor is likely to have a greater impact,” the PwC said.
According to the report, the continued rise in headline inflation was partly caused by the supply shocks to the commodity process and the fallout from the pandemic.
It said these factors had kept the inflation rate above its long-term rate of 11.9 per cent.
PwC added that on a month-on-month basis, headline inflation rose the fastest since July 2018 by 1.2 per cent in May.
It said this was due to significant disruptions to domestic and global supply chains on account of the lockdown measures brought on by mitigating the pandemic’s spread.
The firm advised that support should be given to the agricultural and food processing sectors, an adequate supply-chain mechanism should be provided and a functional and an effective price regulatory system should be ensured.