By Dipo Olowookere
Analysts at Meristem Research have projected that inflation rate in Nigeria for the month of October 2019 will increase to 11.32 percent from 11.24 percent recorded in September, indicating a year-on-year 0.08 percent rise.
The firm said one of the major factors to cause this increase in inflation rate is the closure of land borders since August 2019, which has caused prices of food items to significantly moved up.
In its inflation report, Meristem Research noted that decline in prices of food items in August 2019 was caused by the harvest season, but things changed when federal government closed the country’s borders, which had impact on commodity prices, triggering a 0.22 percent uptick in inflation in September.
“Data from our most recent survey of commodity and food prices suggests a significant expansion in the prices of staples such as rice, poultry and oil in October.
“Just before announcement of the border closure in August, a 50kg bag of rice retailed for c.N12,000. As the full effect of the closure set in, prices surged by between 75.00 percent and 100.00 percent to N21,000 and NGN24,000 per bag,” the report said.
Continuing, it said, “Poultry products (chicken and turkey) and oils have also recorded average price expansions of 33.00 percent and 17.00 percent respectively over the same period.
“Combined, these items formed the strongest inflationary pressure points, as prices of other local staples remained relatively stable.”
Analysts at Meristem Research said the Purchasing Manager’s Index (PMI) of the Central Bank of Nigeria (CBN) also supports the view that inflationary pressures are building as the index for last month rose from 57.7 in September to 58.2.
“We envisage that the imminent upward review in energy tariffs and extension of the border closure period to January 31, 2020 should sustain pressure on the CPI in the near term,” it said.
On the global scene, the Food Price Index of the Food and Agriculture Organization of the United Nations ticked up by 5.97 percent year-on-year in October for the third consecutive month largely due to higher meat (+13.87 percent), dairy (+5.58 percent) and oils (+2.64%) prices.
“While this should ordinarily portend intensified inflationary pressures, owing to Nigeria’s large food import bill, the closure of the country’s land borders has emerged as the major upside risk to inflation,” the report said.
Concluding, Meristem Research said, “Following our evaluation of primary inflationary triggers in the economy, we forecast that headline inflation will tick up by 0.08 percent YoY, to 11.32 percent for October 2019.”
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