A group of analysts at Financial Derivates Company Limited (FDL) have predicted further drop in inflation to 15.99 per cent, attributing the decline to widespread ease in food commodity prices, associated with early harvest. This is coming on the heels of National Bureau of Statistic (NBS) October 17 likely releasing of Consumer Price Index and Inflation report for September 2017.
Inflation rate according to NBS has continued to drop, making it the eight consecutive monthly decline this year. NBS had reported 16.01 per cent inflation rate in August from 16.05 per cent in July. The inflation rate was at 16.25 per cent and 16.1 per cent in May and June respectively.
Inflation rate for April was at 17.24 per cent; 17.26 per cent in March; 17.78 per cent in February and 18.72 per cent in January. FDL managed by Mr. Bismarck Rewane in its report said, “Headline inflation is expected to decline to 15.99per cent from 16.01per cent in August, making it the eight consecutive monthly decline in 2017. We noticed a widespread ease in food commodity prices, usually associated with early harvest.
“We believe the threat of higher inflation is looming with the commencement of the electoral cycle. This is because the incumbent government will roll out a series of people-friendly disbursements and initiatives.
“We are projecting a slight decline in year-on-year headline inflation to 15.99per cent in September. This is a 0.02per cent decrease from the previous month, making it the eight consecutive monthly decline in 2017.
“This sustained but marginal reduction can be partially attributed to the effect of tight liquidity in the system, evidenced by a contraction in money supply by 11.06per cent to N21.85trillion in August. We noticed a widespread ease in commodity prices, usually associated with early harvest.
“We also expect month-on-month inflation to decline to a one year low of 0.81per cent (10.16per cent annualized) from 0.97per cent (12.28per cent annualized) in August.
“This reduction is partially due to a slight appreciation of the naira and availability of forex in the market during the period under review. This has been complemented by an improvement in power supply, which increased from an average of 3,352.97MW/hr to 3,432.97MW/hr in September. On the negative side, diesel price peaked at N190/liter during the month.
The report added that, “Inflationary pressure eased within the SSA, as inflation averaged 13.1per cent partly due to policy changes, increased output and a reduction in petrol prices. Most Central Banks have held rates to prevent the risk of inflation. Like other SSA peers, Nigeria has used tight monetary policies to ensure price stability.”
The Monetary Policy Committee of the Central Bank of Nigeria had expressed satisfaction with the gradual, but consistent decline in inflation, noting, however, that the substantial base effect in addition to the continuous improvement in the naira exchange rate across all segments of the foreign exchange market; and considerable improvement in foreign capital inflow.
Committee was of the view that economic activity would become clearer between now and the first quarter of 2018, when growth is expected to have sufficiently strengthened and gains in receding inflation, very obvious.