Dr. Yemi Kale, KPMG Nigeria’s Chief Economist and former CEO of the Nigeria Bureau of Statistics, projected that Nigeria’s inflation could reach 30% in June 2023.
In a tweet, Kale attributed this forecast to a recent increase in Premium Motor Spirit (PMS) prices, which he estimates will add approximately 6% to the Consumer Price Index (CPI) for June over the expected May CPI.
He noted, “Using the NBS CPI model+my macro model, the new PMS prices may add about 6% to CPI in June over whatever is reported in May, holding other things constant.
April was 22.22% & May is unknown & won’t be affected. So June will be somewhere about 30%. Not as bad as I expected.”
Energy Costs and Inflation
Energy costs, particularly fuel, are a significant driver of inflation in Nigeria. According to the latest CPI report, gas and other fuels contributed 3.72% to the headline inflation index for April 2023, when inflation stood at 22.22%.
The recent spike in PMS prices is expected to further elevate the CPI, pushing inflation to around 30% in June 2023, as per Kale’s projection.
Fuel Subsidy Removal Context
The inflation forecast follows President Tinubu’s inauguration speech on May 29, 2023, announcing the removal of fuel subsidies.
This policy led to an immediate surge in PMS prices nationwide, triggering fuel scarcity in various regions and contributing to economic pressures.
Consumer Impact
A higher CPI will reduce consumer purchasing power, particularly affecting low and middle-income earners who allocate a significant portion of their income to essentials like food and transportation.
These sectors are directly impacted by rising energy costs, exacerbating the cost-of-living challenges for many Nigerians.
