By Modupe Gbadeyanka
Analysts at Financial Derivatives Company (FDC) have projected that inflation rate in Nigeria for the month of October 2018 will increase by marginally by 0.07 percent to 11.35 percent, making it the third consecutive month of rising inflation after a sustained period of declining price level.
In a report released by the firm, it was disclosed that the rise in the headline inflation would be influenced by increasing prices of food items in the country caused by floods and insecurity in agrarian states of the middle belt.
Business Post recalls that flood ravaged many communities in the country this year, which made it nearly impossible for farmers to reap the fruit of the labour.
Another issue is security caused by Boko Haram in the north eastern part of Nigeria and farmers/herdsmen clashes in the middle belt region of the country. Both crises have resulted in a decline in agricultural output and an increase in the prices of commodities such as onions, pepper and melon.
However, FDC said the month-on-month sub-index is expected to decline marginally by 0.01 percent to 0.82 percent (10.48 percent annualized) in October as a result of the harvest. Though, the increased supply was negatively impacted by disruptions in the food producing states.
The report said during the month, average on-grid power output increased by 6.77 percent to 3,752.23MWh/h, which it noted is expected to have a positive impact on aggregate output and also reduce the demand for alternative source of energy such as diesel.
The relative stability in exchange rate at the parallel market (N361/$-N362/$) could filter through to stable cost of imports.
FDC said the average wholesale (depot) price of diesel increased by 2.38 percent to N215/litre in October, pointing out that the retail price of diesel in Lagos was as high as N251/litre, reflecting a higher logistics cost, which could drive up the operating expenses of firms, with the price of premium motor spirit (PMS) also increased across the country.
According to FDC, an imminent increase in the minimum wage is likely to fuel inflationary pressures and push the fiscal deficit of both federal and state governments in the next few quarters.
An increase in inflation compounded by a spike in the unemployment numbers to be released this month will increase the misery index, which is currently 51.28 percent. This could be politically expensive for the incumbent government, the report said.
It added that the continued monetary policy normalization in the United States will further increase volatility and pressure on emerging market currencies, stressing that for Nigeria, this possible weakening of the naira could result in higher import prices.
“The next MPC meeting is scheduled to hold on November 19/20. The committee, which is saddled with the responsibility of ensuring price stability, is likely to continue with the tight monetary stance by maintaining the status quo,” the report said.
Dipo Olowookere 
Adedapo Adesanya