Analysts Predict Further Drop In Inflation To 15.99%

By Nse Anthony-Uko
(Sundiata Finance) – A group of analysts at Financial Derivatives Company Limited (FDC) 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.

For analysts at FSDH Merchant Bank, inflation for September will drop to 15.96 per cent. The decline they say is largely attributed to the downward movement in food items, as well as decrease in some non-food items.

The FSDH analysts while noting that food prices at the global market was on the rise said “the prices of most of the food items we monitored in September 2017 moderated downwards, while a few major items recorded price appreciation.”

However they noted that the appreciation of the naira in the inter-bank and parallel markets should douse the impact of the increase recorded in the prices of food at the international market. “Our analysis indicates that the value of the Naira appreciated at both the inter-bank and parallel markets in September 2017.

“The value of Naira gained marginally by 0.03 per cent to close at N305.75 to the dollar at the inter-bank market and appreciated by 0.68 per cent to close at N365.50 to the dollar at the parallel market at the end of September 2017, compared with August 2017.”

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.

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