Inflation rate is expected to trend up to 9.85% from 9.62% recorded in January 2016. The increase in the inflation rate would be as a result of the volatility in the foreign exchange market during the month. The National Bureau of Statistics (NBS) would release the inflation rate for the month of February 2016 on March 17, 2016.
The Food Price Index (FPI) that the Food and Agriculture Organization (FAO) released shows that food prices increased marginally in February from January level. The FPI increased marginally by 0.14% from the revised figure in January. The price of vegetable oil surged in February while meat prices recorded a small recovery. The increases in these two categories were more than enough to offset the decline in cereal, sugar and dairy prices.
The FAO Vegetable Oil Price Index was up by 8.04% from January, the highest value since June 2015. The upswing was primarily driven by reports of falling inventories in Southeast Asia coupled with poor production prospects in the coming months. The FAO Meat Price Index was up 0.67% as prices for the different categories of meat went in different directions.
The FAO Cereal Price Index was marginally down by 0.55%, due to ample global supplies and increased competition for export markets. Wheat prices were mostly affected while on the other hand, rice prices firmed slightly. The FAO Dairy Price Index fell by 2.13%, due to lackluster import demand (especially by China) and increase in supply for export. The FAO Sugar Price Index recorded the highest loss. The Index was down 6.16% due to better than expected crop conditions from Brazil.
Our analysis indicates that the value of the Naira remained stable at the inter-bank market while it depreciated at the parallel market by 9.85% to close at US$/N340.00 from US$/N306.50 at the end of January. The depreciation at the parallel market led to an increase in the prices of imported consumer goods in Nigeria between the two months under review.
The prices of most of the food items that FSDH Research monitored in February 2016 increased. The prices of vegetable oil, sweet potatoes, fish, meat, Irish potatoes, beans, garri and rice increased by 23.56%, 20%, 12.5%, 10%, 10%, 8.33%, 6.82% and 5.75% respectively.
However, prices of onions and tomatoes fell by 43.75% and 31.06% respectively. Meanwhile, the prices of yam and palm oil remained unchanged. The movement in the prices of food items during the month resulted in 0.99% increase in our Food and Non-Alcoholic Index to 189.15 points. We also noticed an increase in the prices of education, transport, clothing and footwear between January and February 2016.
Our model indicates that the price movements in consumer goods and services in February 2016 would increase the CCPI to 183.35 points, representing a month-on-month increase of 0.92%. We estimate that the increase in the CCPI in February will produce an inflation rate of 9.85%.