Story by Kayode Tokede
Analyst at Financial Derivatives Company Limited (FDC) has said inflation rate for month of August sets to inflect upward by 0.07 per cent to 11.15 per cent.
The National Bureau of Statistics (NBS) had announced 11.08 per cent inflation rate for July.
FDC latest report, said a few skeptical analysts were of the view that the declining trend of inflation was too good to be true.
According to FDC report, “The new projection from our inflation survey seems to confirm the saying that “if it is too good to be true, then it must be true”.
“We are estimating a marginal increase in both headline and monthly inflation in August. The headline inflation is expected to inch up by 0.07per cent to 11.15per cent while the monthly inflation is projected to rise by 0.10per cent to 1.11per cent (14.15per cent annualized).
“The trend of falling inflation is being bucked for a number of reasons including the partial closure of the land borders which led to temporary food shortages especially turkey, chicken and rice.
“The impact of this was a spike in the prices of these food items. The price of a 50kg bag of rice increased by almost 30% to N18,000 in August from N14,000 in July. It however curtailed smuggling of petrol and diesel, thus creating excess supply and driving down prices. The wholesale price of diesel fell by 3.15per cent to N215/liter.
“Other inflation stoking factors that had hitherto been benign are now becoming potent. These include, adjustments in the exchange rate for computing custom duty to N326/$, forex restriction for dairy products and general food imports. Nigeria’s annual food imports is estimated at $3.9billion.
The core sub-index (inflation less seasonalities) is likely to decline marginally by 0.05per cent to 8.75per cent in August.
“This will be buoyed by lower diesel prices as well as the stability in the exchange rate. The wholesale price of diesel fell by 3.15per cent to N215 per liter, thereby reducing logistics and distribution costs. At the parallel market, the naira was stable at N360/$.
“A possible reversal in the inflation trend will be a consideration at the next MPC meeting. This increases the probability of further tightening by an increase in interest rates. However, the committee will be mindful of a possible worsening of the cyclical downturn in the next quarter.”