Update1: March inflation decline; not as low as analysts expected

There is a slow down in the steep upward rise in the prices of food and other items in the Nigerian market,  data from the National Bureau of Statistics has shown.

 

March headline inflation, which measures the average change in the prices of both goods and services, was 17.26 percent as March ending down from 17.44 percent in February, indicating that the prices of goods and services are no longer rising as fast as they were in the same period of 2016.

 

NBS linked the lower inflation figure to the fact that food prices are already high and therefore has less headroom for upward movement and also to the early effect of the Central Bank of Nigeria’s decision to flood the interbank foreign exchange market with dollars which has resulted in a significant appreciation in the exchange rate of the naira in the black market.

 

Nonetheless, the inflation rate of 17.26 percent was still higher than the forecast of analysts who had expected that it would drop even more steeply. Analysts at the Financial Derivatives Company, FDC had forecast that Nigeria’s headline inflation would decline for the second month to 16.44 percent.

 

Explaining why it expected a lower inflation figure, the analysts at FDC noted that, “the reasons for a moderation in the price level in March are not farfetched.”

 

“February and March 2017 was the period when the CBN’s aggressive intervention in the foreign exchange market forced a major appreciation in the Naira (13.5% to N392) and has fed mildly into retail prices.”

 

“However, more significantly is the steep decline in the price of diesel from a peak of N260 to N195 at the wholesale level.”

 

But FDC forecast that there could be better inflation figures in April as the 90-day transmission lag effect of the recent CBN’s forex policy will become manifest in the months of April and May.

 

Analysts at Standard Bank Group (SBG) had also forecast a low inflation figure of 17 percent for March in a note to investors released April 13. They also forecast a further decline in both food and non-food inflation going forward.

 

The NBS data released this morning shows that month on month headline inflation also showed a decline for the first time to 1.42 percent in March from 1.72 percent in February.

 

The items that drove inflation up in March include; housing, water, electricity, gas and water fuel, education, food and alcoholic beverages, and footwear.

 

But while food inflation declined to 18.44 percent in March when compared to 18.53 percent in February, the monthly average change in inflation indicated an upward trend rising by 2.21 percent in March. This indicates that upward pressure on food prices continue to persist despite the government efforts to boost food production in the country.

Bread, cereals, milk, meat, potatoes and yam tubers as well as cheese and egg had the most increase in prices in March putting further pressure on family incomes.