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Base Effect to Ease February Inflation to 14.31%—FSDH

By Dipo Olowookere

Analysts at FSDH Research have predicted that inflation rate for the month February 2018 will slow further to 14.31 percent from 15.13 percent recorded in January 2018.

The drop in the rate for the month is attributed to the base effect of previous year.

FSDH said it observed decrease in some major food prices as well as the slowdown in the price movement in some categories of non-food items in the Consumer Price Index (CPI) basket.

On March 14, 2018, the National Bureau of Statistics (NBS) is expected to release the inflation rate for the month of February 2018, based on the data release calendar on its website.

The February 2018 monthly Food Price Index (FPI) from the Food and Agriculture Organization (FAO) shows that the Index averaged 170.8 points, 1.07 percent higher than the revised value for January but 2.68 percent lower than the February 2017 figure. The increase in the FPI represented increases in all categories of commodities used in the calculation of the Index except vegetable oil and sugar.

The FAO Dairy Price Index appreciated by 6.21 percent in February. The prices of products in all the four categories of milk products that constitute the Index firmed up. This increase was mainly supported by strong import demand and lower than expected milk output.

The FAO Cereal Price Index increased by 2.55 percent from the previous month. The sustained increase recorded in the cereal price Index is as a result of the rise in the prices of wheat, maize and rice.

The FAO Meat Index was marginally up by 0.06 percent. The increase in the prices for bovine meat was offset by decreases recorded in the prices of poultry and pig meat. On the flip side, the FAO Sugar Price Index dropped by 3.45 percent and represents its lowest level in two years. The drop in the Index is on the heels of favourable supply conditions in the main sugar producing regions and last year’s removal of output quotas.

The FAO Vegetable Oil Price Index was down by 3.15 percent. The easing global import demand and rising inventories exerted downward pressure on the prices of palm oil and soy.

“Our analysis indicates that the value of the Naira appreciated in the parallel market while it depreciated in the inter-bank market.

“The Naira gained N2.00 in the parallel market to close at N362.50/$ while it lost 20kobo at the inter-bank market to close at N305.90/$ at the end of February.

“FSDH Research notes that there is a potential increase in the local prices of imported food items because of the faster than expected increase in the international food prices.

“This may have negative impact on inflation rate going forward.

“The prices of most of the food items we monitored in February 2018 recorded moderate increases, leading to 0.80 percent increase in our Food and Non-Alcoholic Index. The Index increased by 17.50 percent from 224.77 points recorded in February 2017.

“We also noticed increase in the prices of Transport and Housing, Water, Electricity, Gas & Other Fuels divisions between January and February 2018.

“We estimate that the increase in the Composite Consumer Price Index (CCPI) in February 2018 would produce an inflation rate of 14.31 percent lower than the 15.13 percent recorded in January,” the report tagged Inflation Watch said.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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