CBN Inflation Expectation Survey

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January 30, 2025/CSL Research

The Central Bank of Nigeria (CBN) recently published its December 2024 Inflation Expectation Survey, capturing perspectives from households and businesses across the country. The survey reveals that a majority of respondents perceive the current inflation rate as high. Notably, 83.5% of household respondents believe inflation is high, compared to 80.6% of surveyed businesses who share this view. Overall, 82.0% of all respondents see the current rate of inflation as high, while 10.3% consider it moderate, and 7.7% perceive it as low.

Across business types, there is a general consensus that the current inflation rate is high, with small businesses expressing the strongest perception. Regarding factors driving inflation perceptions, energy costs rank as the top driver for both firms and households, with overall scores of 92.8% and 88.7% across the respective categories. Exchange rate (89.7%) and transportation cost (89.5%) ranked second and third as the drivers of inflation perception for firms in the period while the duo interchanged positions as the third (84.4%) and second (88.0%) inflation perception drivers for households in the current period.

Most respondents from businesses (47.0%) and households (64.5%) expects to see inflation increase in the next month to the survey period, with a gradual ease over the next six months from December 2024. This optimism is particularly strong among business respondents, with 25.7%, compared with 18.8% of households anticipating lower inflation in six months.

Reflecting the high inflation perception in the month in view, more businesses (58.6%) expect higher expenditure compared to households (47.9%) in the current month, with both categories of respondents anticipating lowering spending as their expenditure expectations gradually decrease over the next 6 months. Additionally, 66.4% of respondents support a reduction in interest rates by the Central Bank of Nigeria (CBN), while 34.5% believe that CBN announcements significantly impact inflation.

We project headline inflation in 2025 to ease when compared to 2024 levels. Discounting any marked impact of the inflation rebasing exercise by the National Bureau of Statistics (NBS) in the year on the Consumer Price Index (CPI) numbers, average headline inflation is projected to settle at 29.50% in 2025, with year-end inflation expected to peg at 25.16%. This is premised on factors such as the positive effect of a high base from 2024, reduced foreign exchange risks, stable energy prices, and the potential for lower Premium Motor Spirit (PMS) prices due to increased competition among local refineries.

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