The Parthian’s View: Inflation Impacts Wallets Not Plans
1. Inflation rate for the month of July 2022 rose to 19.6% from 18.6% in June 2022. This increase to 19.6% is the highest in the last 17 years. As of July 2021, the inflation rate was at 17.4%.
2. Some of the drivers of this inflation are:
- a. Increase in energy prices such as premium motor spirit (petrol), diesel, kerosene, and aviation fuel.
- b. Increase in transportation prices
- c. Increase in food prices given the global increase in fertilizer prices and persistent insecurity issues.
- d. Increased spending related to the 2023 general elections.
- e. Increase in FX crises, Naira depreciated to ₦427.45/$ at the Investors and Exporters (I&E) window and to as low as ₦700/$ at the parallel market.
3. The key inflation sub-indices food inflation and core inflation both increased in the month of July 2022. Food inflation increased to 22.0% (from 20.6% in June 2022) while core inflation increased to 16.3% (from 15.6% in June 2022).
4. What this means is that the value of consumers’ income and investment have been impacted negatively by this increase. As such, consumers must either earn more to be able to afford their current needs or get higher returns on their investments, i.e., returns that will yield higher than the current level of inflation.
5. We expect inflation to continue in the upward trajectory due to the persistent energy issues, FX scarcity, and more spending related to the 2023 general elections.
In summary, what we need to understand is that while saving is an important and necessary part of your portfolio and financial plan, it cannot be your only strategy to manage your money.
You must invest!
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