By Modupe Gbadeyanka
Analysts at Financial Derivatives Company Ltd have projected a further moderation in the inflation rate for the month of October.
The last inflation rate released by the National Bureau of Statistics (NBS) for the month of September 2017 put the rate at 15.98 percent.
According to the calendar of the NBS, the October inflation rate is expected to be released tomorrow, Wednesday, November 15, 2017.
But analysts at Financial Derivatives Company Ltd say the rate will again decline to 15.89 percent with the food inflation also easing.
“We are forecasting that Nigeria’s year-on-year headline inflation will slide to 15.89 percent in October. This is a marginal decline of 0.09 percent from September’s rate of 15.98 percent.
“Whilst the scale of change is marginal, the downward direction of movement is important to policy makers. If our estimates are accurate, this will mark the ninth consecutive monthly decline in the year 2017.
“We also expect month-on-month inflation to moderate to 0.74 percent (9.31 percent annualized) from 0.78 percent (9.84 percent annualized) in September.
“A continuing trend of slowing inflation will be music to the ears of the economic management team, who have insisted that the economy is beginning to recover from its sharpest downturn in decades,” the firm said in its FDC Economic Bulletin released last Wednesday.
Giving its reason for an expected decline in the food inflation rate, the company said, “This reduction in inflation can be mostly attributed to the slide in food prices, especially grains, and to a lesser degree in the slight appreciation of the naira to N363/$ in October. Also interesting is the ample liquidity in the forex market which helped ameliorate forex shortages.
Financial Derivatives Company Ltd said in the report that food inflation, which has been the major driver of year-on-year headline inflation so far this year, is expected to decline to 20.1 percent in October from 20.3 percent in September.
“Domestic food inflation is benefiting from a bountiful harvest and prices are beginning to reflect in the food basket. Major food items such as flour, yam, garri, rice and tomatoes recorded price drops partly due to the intensity of competition, putting downward pressure on the food basket.
“The increase in output during the month was complemented by the move by manufacturers to exhaust existing inventory and restock for the festive season. This somewhat offset the inflationary pressure from high logistics cost.
“Core inflation is expected to rise marginally to 12.2 percent in October from 12.1 percent in September as high logistics cost still plagues the economy. Diesel prices rose to N205/litre during the month of October even though there was some improvement in power supply in October – increasing to 3,696MW/hr.”
Adedapo Adesanya