High hopes that Nigeria’s economy will get out of recession might be prolonged further. June inflation as released by the National Bureau of Statistics shows that the index marginally reduced to 16.1%.
When compared to 16.25% in May, it is becoming clearer that the inflation rate might have reached a point of equilibrium.
The data is less encouraging when the food price index is looked at. The sub index is at 19.91% up from 19.27% in May. Nigerians keep paying more for food, a pointer to the fact that life is still much tougher for many Nigerians who live below USD2 per day.
Nigeria entered recession in the second quarter of last year after the country’s gross domestic product fell for the second time consecutively.
Oil is Nigeria’s top revenue source, the country announced two weeks ago that it will join OPEC production cuts to further stabilise price to the region of USD50 per barrel.
The cessation of vandalism to oil installations and pipelines in Nigeria’s oil-rich Niger Delta has seen a surge in Nigeria’s output in the last six months.
As at the time of writing this report, NYMEX crude was trading for an average of USD46 per barrel. The news of a potential cut by Nigeria and Libya is expected to take oil back to USD50 and above territory. However, there are hiccups for OPEC and its weary members.
Should crude price near USD55 to USD60 per barrel, shale producers will find it attractive to produce, a further slide in crude price would be inevitable.