By Dipo Olowookere
Analysts at FSDH Research have said they expect a marginal drop in the inflation rate for the month of March 2019.
In their Inflation Watch released few days ago, it was stated that the rate could likely decline to 11.29 percent from 11.31 percent recorded in February 2019.
Explaining the rationale behind this expected decline, it was said that the latest review of food prices and other major items that make up the Consumer Price Index (CPI) basket (alcohol beverages, clothing and footwear, housing, water, electricity, gas and other fuels and etc.) support a slight drop in the inflation rate in March.
However, FSDH Research said on a month-on-month basis, there was an increase in the general price level from 0.74 percent in February to 0.83 percent in March 2019.
Last month, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) cited the moderation in the inflation rate since January as one of the justifications for a cut in the interest rate in March 2019.
“As the rainy season approaches, we expect an increase in the prices of food items, particularly vegetables.
“A declining inflation rate is a good development for the Nigerian economy, but we note that the main factors that will ensure the inflation rate drops to a single digit, which is the target of the CBN, are outside the control of the CBN.
“The poor infrastructure in Nigeria, high energy costs, insecurity in some parts of the country and excessive reliance on crude oil as the major source of revenue and foreign exchange earner are the major drivers of inflation in Nigeria.
“Our preliminary checks also suggest that imported inflation rate (i.e. prices of goods using imports as raw materials) lessened in March. The marginal appreciation in the value of Naira in March compared with the relative stability in the prices of food items on the international market provided a gain on the prices of consumer items in Nigeria,” it said.
It was disclosed that the increase in the global price of crude oil in March and increase in the inflow from the Foreign Portfolio Investment (FPI) led to the appreciation in the value of the Naira.
The value of the Naira at end-March at N360.47/$ compared with end-February at N361.13/$ indicates that the value of the Naira strengthened by N0.66.
“Although our expected inflation rate forecast is still higher than the target of the CBN, the relative low inflation rate may encourage the issuance of Commercial Papers (CPs) that will enable corporates to fund their short-term capital requirements,” it stated.
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