Stears launches its inflation forecast solution to guide investment and policy decisions

Oct 18, 2023|Michael Famoroti

Stears has released its market-leading Pan-African Inflation Forecast to give users a clear view of future prices in multiple African countries and guide your short-to-medium term pricing, investment, and policy decisions.

Our tool offers monthly inflation forecasts stretching from October 2023 to December 2024. This range encompasses both average and year-end predictions for 2023 and 2024. Following the release of Nigeria’s September 2023 inflation data on October 16th, Nigeria’s forecasts were made available first. Kenya’s forecasts are slated for early November, with other African countries set for early 2024. 

For October 2023, we forecast Nigeria’s inflation at 27%—a rise of 28 basis points from the inflation reported in September. This uptick is largely attributed to the mounting downward pressure on the naira, compounded by heavy rainfall that’s impacting food prices.



Our forecasts are powered by vector autoregression (VAR) models—trusted tools among central banks and academic institutions. They account for both general and country-specific inflation triggers, like money supply growth and premium motor spirit prices. These details, rooted in economic theory and evidence, guide users in understanding the forces shaping inflation. This methodology serves two objectives: ensuring precision in our forecasts and aiding users in creating inflation scenarios based on real-life events.

Timely forecasts in an era of high and volatile inflation

The global spotlight is on inflation. Since Q2’2022, the International Monetary Fund’s (IMF) World Economic Outlook (WEO) has consistently flagged inflation.

Rising global energy and food costs, intensified by geopolitical tensions and the pandemic’s aftermath, have pushed inflation to historic levels. In 2022, the global inflation rate hit 8.7%, a 25-year record. Though it’s projected to taper to 6.9% in 2023, it’s still the second-highest yearly average since 1996.

African nations, however, feel the brunt more acutely. Fast-paced monetary policy changes in developed economies, like the US’s interest rate hike from 0.25% in January 2022 to 5.5% in September 2023, have exerted pressure on African economies.

It is important to note that high inflation usually implies volatile inflation. For example, Nigeria’s average annual inflation jumped from 17.0% in 2021 to 24.5% in 2023 (Stears’ forecast), with a standard deviation as high as 4% during those three years. The last time prices were that volatile (measured by standard deviation) was the 2015-2017 period, the peak of Nigeria’s ongoing currency crisis.

In this era of high and volatile inflation:

  • Corporates need reliable inflation forecasts to optimise their costs and pricing decisions.
  • Investors need reliable inflation forecasts to calibrate their investment targets and returns.
  • Policy-makers need inflation forecasts to estimate citizens’ welfare and direct economic policy.

Stears’ Pan-African inflation models and forecasts are built to serve these purposes.


Scenario-based forecasts that allow users understand inflation drivers

Our VAR methodology enables us to generate multiple (potentially infinite) forecast scenarios, based on different forecast iterations of the model variables. For example, our model can reliably forecast Nigeria’s inflation when premium motor spirit (PMS) prices are ₦700 per litre vs. ₦1,000 per litre. Likewise, we can forecast Nigeria’s inflation when the parallel market exchange rate is at NGN1,000/USD, and oil prices are $90 per barrel vs. NGN1,200/USD and $80 per barrel.

This flexibility gives users a multi-faceted view of future inflation—based on how real events could play out—and also enables them to leverage internal perspectives and select their preferred scenarios.

We have provided three scenarios on the Inflation Forecast dashboard: base, bull, and bear case scenarios. The rationales and conditions for each scenario have also been included. The scenarios provided double as a reliable forecast range or confidence interval for Nigeria’s future inflation and would be particularly useful for scenario-planning.

Users of our forecast can also dig deeper into the heart of inflation’s volatility. By dissecting the variance decomposition of the model, we can discern which factors hold the most sway over inflationary trends in specific countries. 

The model is even more useful when we look at variance decomposition while excluding lagged inflation, which allows us to identify the factors that most affect inflation in Nigeria.

These results are very powerful as:

  • They steer policy-makers to the appropriate tools to tackle record-high inflation.
  • They provide consumers, corporates, and investors a quantitative framework for assessing the impact of economic shocks (e.g. currency depreciation, higher international food prices) and economic reforms (e.g. PMS price liberalisation).  
  • They provide Pan-African stakeholders with a clear view of which factors matter most in different African countries.

Moreover, on our Inflation Forecast dashboard, you can assess precisely how the importance of each variable changes over time.

The release of the Stears Pan-African inflation forecast aligns with our commitment to provide more advanced data & analytics solutions that help our users better invest and operate in Africa. Visit the Inflation Forecast dashboard to view our different forecast scenarios, identify key inflation drivers, and understand our methodology.

Stay ahead of the curve in your strategic and investment plans for 2024 by leveraging credible and rigorous inflation forecasts in your decision-making.