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Inflation to Drop in June to 10.94% from 11.61%—FSDH Analysts

By Dipo Olowookere

Analysts at FSDH Research have predicted that the year-on-year inflation rate for the month of June 2018 would moderate further to 10.94 percent from the 11.61 percent recorded in May 2018.

According to its Inflation Watch released last Thursday, the drop in the inflation rate would reflect the base effect in the Composite Consumer Price Index (CCPI) from the previous year and slower rate of increase in prices.

Based on the calendar on its website, the National Bureau of Statistics (NBS) is due to release the inflation rate for the month of June on Friday, July 13, 2018.

FSDH Research said in its report obtained by Business Post that it notes that consumer prices increased in June but at a lower rate than the increases recorded in May.

It noted that the prices of most of the food items monitored in June 2018 increased, leading to a 1.10 percent increase in its Food and Non-Alcoholic Index. This Index increased year-on-year by 12.43 percent, up from 245.10 points recorded in June 2017.

The leading investment firm also observed an increase in the prices of Transport and Housing, Water, Electricity, Gas & Other Fuels divisions between May and June 2018.

According to the Food Price Index (FPI) published last week by the Food and Agriculture Organization (FAO) for the month of June 2018 shows that the Index averaged 173.7 points, 1.3 percent lower than the value for May 2018, and representing the first month-on-month decline in 2018.

The FAO explained that the rising tensions regarding international trade relations among large economies have weakened prices.

The FAO Cereal Price Index was down by 3.7 percent, but 8 percent higher than a year ago, with the drop driven largely by relatively sharp falls in maize and wheat prices, while rice prices increased.

The FAO Dairy Price Index also dropped by 0.90 percent between May and June; driven by the decrease in cheese prices, more than offsetting a rise in skim milk powder prices, while those of butter and whole milk powder remained unchanged.

The FAO Vegetable Oil Price Index was also down by 3 percent, primarily driven by a decline in the prices of palm oil, soybean and sunflower oils occasioned by slow global imports demand and large inventories.

However, the FAO Sugar Index increased by 1.2 percent from May, making it the first increase after six months of consecutive declines. The FAO Meat Index was also marginally up by 0.3 percent driven by the increase in the prices for ovine and pig meat.

FSDH Research said its analysis indicates that the value of the Naira appreciated at the Nigerian Autonomous Foreign Exchange (NAFEX) market in June 2018. The value of the Naira appreciated by 0.15 percent to close at $/N361.08k at the NAFEX market at the end of June.

The general decline in the international prices of food coupled with the appreciation in the value of the Naira muted the prices of imported consumer goods in Nigeria between the two months under review.

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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