Inflation rate in the country has been projected to drop further in April, thereby inching towards a single-digit rate.
Analysts at FSDH Merchant Bank Limited stated this in a report. They anticipated that inflation rate (year-on-year) would drop to 12.43 per cent in April 2018, from the 13.34 per cent recorded in the month of March.
The investment bank said despite the increase recorded in the prices of some food and non-food items, the base effect of the Composite Consumer Price Index (CCPI) in April 2017, would depress the inflation rate.
It indicated that the value of the naira depreciated at both the Nigerian Autonomous Foreign Exchange (NAFEX) and parallel markets. According to the report, the value of the naira depreciated by 0.09 per cent and 0.14 per cent to close at US$/N360.17 and US$/N363 respectively at the NAFEX and parallel markets at the end of April.
“The rise in the international prices of food coupled with the marginal depreciation in the value of the naira led to an increase in the prices of imported consumer goods in Nigeria between the two months under review.
“The prices of certain seasonal food items we monitored appreciated in April 2018, leading to 0.86 per cent increase in our Food and Non-Alcoholic Index.
“This index increased year-on-year by 14.71per cent, up from 234.39 points recorded in April 2017. We also observed an increase in the prices of Transport and Housing, Water, Electricity, Gas & Other Fuels divisions between March and April. “We estimate that the increase in the CCPI in April would produce an inflation rate of 12.43 per cent lower than the 13.34 per cent recorded in March,” it added.
Also, the Financial Derivatives Company Limited projected inflation rate for April to reduce to 12.7 per cent, adding that food inflation likely to reach point of inflection soon.
It, however, identified likely risks to further drop in inflation to include the passage of 2018 budget, increased election spending and growth in broad money supply (M2).
Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele recently said the central bank would continue to work towards a single-digit inflation rate.
“We would love as much as possible to have inflation as low as possible. Last month, inflation was 13.43 per cent.
“We are hoping that in 2018, we should achieve a very low double digit inflation level and if we are lucky, high single-digit.
“And I think with that we should be seen to be moving in the right direction,” Emefiele had explained.
The Food Price Index (FPI) from the Food and Agriculture Organisation (FAO) for April 2018 showed that the Index averaged 173.5 points, 0.25 per cent higher than the revised value for March 2018, and 2.72 per cent higher than the April 2017 figure.
According to the FAO, sugar prices recorded the highest drop; vegetable oil and meat prices also declined.
However, prices of dairy and cereal continued to trend upward. The FAO Dairy Price Index was up by 3.4 per cent between March and April. Increased demand for all milk products, coupled with reduced exports supply, led to the increase in the Index.
The FAO Cereal Price Index also appreciated by 1.7 per cent from the previous month, on the heels of improved prices of wheat, coarse grains and rice.
On the flip side, the favourable supply glut in the market, and a weaker Brazilian currency (Real) continued to weigh on the prices of sugar. Hence, the FAO Sugar Price Index fell by 4.8 per cent in April to a 31-month low.
The FAO Vegetable Oil Price Index was down by 1.43 per cent, driven by a fall in prices of palm and soy oil, the key commodities in the Index.
The FAO Meat Index was down by 0.94 per cent driven by the decrease in the prices for bovine and pig meat.