By Dipo Olowookere
One of the leading investment research firms in Nigeria, FSDH, has predicted a marginal drop in the inflation rate for the month of July 2018.
The National Bureau of Statistics (NBS) is due to release the inflation rate for the month of July on Wednesday, August 15, 2018.
In the month of June 2018, the inflation rate moderated to 11.23 percent year-on-year and analysts at FSDH are saying this would further drop to 11.01 percent.
Economic expert at the company explained that the expected decrease in the inflation rate would be largely due to the base effect of the previous year with a slower increase observed in the price of some food items in July than in June.
The Food Price Index (FPI) published by the Food and Agriculture Organization (FAO) for the month of July 2018 indicated that the index averaged 168 points in July 2018, 3.73 percent lower than the June value, and the first significant month-on-month decline since December 2017.
According to the FAO, all the sub-indices reflected a notable drop in values. The FAO Dairy Index fell by 6.59 percent from June 2018 as the prices of butter, cheese, skim milk powder and whole milk powder eased in July.
The FAO Sugar Price Index was down by 6.01 percent on the heels of reports on improved supply conditions in the main sugar producing region of India and Thailand.
The FAO Cereal Price Index was down by 3.58 percent, largely driven by weaker export quotations for maize, rice and wheat. The FAO Vegetable Oil Price Index was down by 2.88 percent, marking a two and half year low and the sixth consecutive month fall in the index.
This was as a result of abundant inventory levels coupled with a favourable outlook for global supply and weak export demand of soy and palm oil.
The FAO Meat Price Index was also down by 1.88 percent as prices of bovine, pig and poultry meat declined due to reduced demand.
According to FSDH, its analysis indicated that the value of the Naira depreciated marginally at the Nigerian Autonomous Foreign Exchange (NAFEX), while it appreciated at the parallel market to end July 2018.
The value of the Naira depreciated by 0.03 percent to close at $/N361.20 at the NAFEX market while it appreciated by 0.84 percent at the parallel market to close at $/N359 to end July.
The general decline in the international prices of food coupled with the appreciation in the value of the Naira at the parallel market muted the prices of imported consumer goods in Nigeria between the two months under review.
The prices of most of the food items the firm monitored in July 2018 moderated compared with June, while a few items recorded price appreciation.
“The movement in the prices of food items during the month led to a 1.18 percent increase in our Food and Non-Alcoholic Index. This Index increased year-on-year by 12.57 percent, up from 248.82 points recorded in July 2017.
“We also observed an increase in the prices of Transport and Housing, Water, Electricity, Gas & Other Fuels divisions between June and July 2018.
“We estimate that the increase in the Composite Consumer Price Index (CCPI) in July would produce an inflation rate of 11.01 percent, lower than the 11.23 percent recorded in June,” the Inflation Watch report released on Friday said.
Adedapo Adesanya