By Dipo Olowookere
Analysts at Meristem Research are forecasting that the inflation rate for the month of August 2018 would record a marginal despite when eventually released this week by the National Bureau of Statistics (NBS).
According to the stats office, the year-on-year inflation rate for the month of July 2018 dropped to 11.14 percent
In a report released yesterday, Meristem Research said the Consumer Price Index (CPI), which measures inflation, will decline by 0.01 percent to 11.13 percent year-on-year in August.
It said there was further pressure on foreign reserves, while the prices of agricultural commodities remain elevated during the period.
The observed capital outflows ahead of the general elections next year was sustained in August and the Naira depreciated by 0.07 percent and 0.56 percent at the interbank and parallel forex markets respectively.
The currency opened at N305.95/$ and N359/$ at the interbank and parallel markets, against closing prices of N306.15/$ and N361.00/$ respectively.
Nigeria’s external reserves shrunk by $1.28 billion in August as the intervention by the Central Bank of Nigeria (CBN) in the FX markets continued.
“We expect to see the impact of this pressure in form of an increase in core inflation,” the firm stated.
It said further that while the pressure from food prices have not spiralled out of control, the impact of the conflicts in the food producing regions continue to pressure food output levels.
Meristem Research analysts said they also expect cost pressure from imported food items to pressure the food index slightly.
“However, we expect a less steep decline in food inflation as the base effect from last year fades out,” the report said.
It added that the overall effect of these factors on headline inflation rate is expected to slow the rate of decline in headline inflation.
“This suggests the inflation trajectory may have bottomed, an indication that headline inflation may trend upwards in the near term, in line with our expectations ahead of the upcoming general elections,” it said.
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