CBN: Rising inflation will make economy weaker in next 12 months

The Central Bank of Nigeria (CBN) survey for fourth quarter of 2020 (Q4 2020) showed that rising inflation will make the country’s economy weaker in 2021.

This was contained in CBN’s statistics department report on ‘Inflation Attitudes Survey for Q4 2020’ released on Monday.

According to the survey report, majority of respondents (60.8 percent) believed that Nigeria’s economy would end up weaker in the next 12 months if prices started to rise faster.

CBN said the responses is consistent with the notion that inflation constrains economic growth.

Also, a majority (66.7 percent) of the respondents expected prices to increase by at least 3 percent over the next 12 months, while only 15.1 percent respondents were optimistic that prices would either go down or remain the same.

In the report, most respondents, given a trade-off, would prefer higher interest rates to higher inflation.

In another CBN’s statistics department report on ‘consumer expectations survey for Q4 2020’ released on Monday, most respondents expect prices of goods and services to rise in the next 12 months.

“The major drivers are: savings, food and other household needs, education, purchase of appliances/ durables, purchase of car/motor vehicle, and purchase of houses,” the report read.

Also, consumers expect borrowing rate to rise and anticipates that the naira would appreciate by the next 12 months, while consumers expect unemployment rate to rise by 2021.

Meanwhile, consumers’ overall confidence outlook in this quarter (Q4 2020) was pessimistic.

“Respondents attributed this unfavourable outlook to declining economic conditions, family financial situation and declining family income.”

However, consumers’ overall confidence outlook for first quarter of 2021 (Q1 2021) and next 12 months was optimistic.

CBN said: “This positive outlook could be attributed to the expected increase in net household income, an anticipated improvement in Nigeria’s economic conditions and expectations to save a bit and/or have plenty over savings in the next quarter and the next 12 months.”