by Ogunrinola Isaiah :
Going by the research done by First Securities Discount House (FSDH) merchant bank, Inflation rate in Nigeria may rise to its highest level since January 2019.
In his words, The Head of research at FSDH, Mr Ayodele Akinwunmi said at the Monthly media press briefing at the weekend in Lagos that “Most people say they would not appreciate a situation where the prices of consumer goods increase in the approved National Minimum Wage.”
“We expect the May inflation rate to further increase maginally to 11.39% from 11.37% recorded in April 2019. In addition, We expect the month-on-month change in the Customer Price Index (CPI) to increase by 1.10% in May 2019, the highest since January 2019”.
With the onset of the rainy season, we have observed upward pressure on the food component of the inflation basket.
The major driver of the expected increase in the inflation rate is the increase in food prices, due to the seasonality effect typically associated with the onset of the planting season. Security challenges in some food producing regions in Nigeria reduce the supply of food items, leading to an increase in prices. The current inflation rate is higher than the 6% – 9% target set by the Central Bank of Nigeria (CBN). Given current realities, the inflation rate will remain above the CBN’s target in the short-to-medium-term. This may reduce the real yield on xed income securities.
The price monitor that FSDH Research conducted on certain food and non-food items in May 2019 shows that most prices increased in May compared with April. A cursory look at the movement in prices at the international market and its likely impact on prices in the local market demonstrate an increase in imported inflation (i.e. prices of goods using imports as raw materials).
The Food Price Index that the Food and Agriculture Organization (FAO) of the United Nations published for the month of June 2019, shows that the prices of some food items increased. The prices of milk, butter, cheese, maize and meat increased on the international market while prices of oils, wheat and sugar declined. Most of the increases recorded on the international market were mainly as a result of limited export availabilities and improved global import demand.
From the previous Nigerian economic analysis, it was discovered that there was a significant decrease in the March 2019 inflation rate up to 11.25% before its rise to 11.37% in April.
Meanwhile, the value of the Naira at end-May was N360.43/US$ compared with end-April N360.40/US$ indicating a marginal loss of 3kobo in the value of the Naira. The depreciation in the Naira coupled with the rise in the prices of food items on the international market mean an increase in the local price of imported food items.