By Nse Anthony-Uko
ABUJA, (Sundiata Finance) – Investment bank, FSDH, said on Monday it expects Nigeria’s inflation rate (year-on-year) for May to drop to 16.13 per cent from 17.24 per cent recorded in April 2017. This would mark the fourth month that prices have cooled.
The National Bureau of Statistics (NBS) is expected to release the comsumer price index (CPI) for May on Thursday, June 15.
The drop is expected to come mainly as a result of base effect from the increase in the pump price of Premium Motor Spirit (PMS) in May 2016 despite the elevated consumer prices recorded in May 2017.
The Nigerian Central Bank has left interest rates at a record high of 14 percent since July 2016 in a bid to curtail spiraling inflation which soared to an 11-year high in 2016 following a big naira devaluation and an upward review in the retail price of petrol. The prices of goods and services have however slowed in the last three months fuelled in part by base effects.
The sharp increase in the prices of consumer goods in May 2017 show that inflationary pressure persists in Nigeria, FSDH said.
“Our model indicates that the general price movements in the consumer goods and services in May 2017 would increase the Composite Consumer Price Index (CCPI) to 230.30 points, representing a month-on-month increase of 1.78%,” FSDH analysts said. “We estimate that the increase in the CCPI in May 2017 would produce an inflation rate of 16.13% lower than the 17.24% recorded in April 2017.”
The monthly Food Price Index (FPI) that the Food and Agriculture Organization (FAO) released on Monday shows that the Index rebounded in May 2017 following three months of consecutive decline.
The Index averaged 172.6 points, 2.19% higher than the revised value for April 2017, as all the sub-indices increased except sugar. The FAO Dairy Price Index increased by 5.15% in May, as prices for all categories of dairy products were on the increase.
The FAO Vegetable Oil Price Index was up by 4.74%, primarily driven by increase in both palm and soy oil prices occasioned by the rising global imports demand, low inventories and robust consumption particularly in the United States.
The prices of meat have continued to trend upward since the beginning of the year 2017. The FAO Meat Price Index was up 1.47% as prices for pig, bovine and ovine meat all increased, while those of poultry meat were stable.
The FAO Cereal Price Index was up by 1.40%, largely on account of the increase in the prices of wheat and rice.
Meanwhile, the price of maize was modest due to large global supply. On the flip side, the continued fall in the price of sugar due to the weak global import demand, improved supply conditions in the main sugar producing regions in Brazil and the sudden depreciation in currency of the Brazilian Real weighed on the sugar Index.
Hence, the FAO Sugar Price Index fell by 2.31% in May 2017 to a 13-month low. The value of the Naira appreciated at both the inter-bank and parallel market.
The Naira gained 0.15% and 3.66% to close at N305.40/US$ and N382/US$ at both the inter-bank and parallel market at the end of May 2017 respectively.
“The appreciation in the Naira is expected to have countered the effect of the rising prices of food at the international market to certain extent,” FSDH said.
“This should lead to a moderation in the pass through effect of imported prices on consumer goods in Nigeria. The prices of most of the food items that FSDH Research monitored in May 2017 increased substantially,” the investment bank added.
The prices of tomatoes, Irish potatoes, yam, meat, rice and sweet potatoes were up by 88.16%, 36.8%, 32.42%, 4.76%, 2.54% and 0.6% respectively. Meanwhile, the prices of onions, vegetable oil, beans, garri and fish were stable.
The movement in the prices of food items during the month resulted in 2.5% increase in our Food and Non Alcoholic Index to 240.28 points. We also noticed increase in the prices of Housing, Water, Electricity, Gas & Other Fuels divisions between April 2017 and May 2017.