Nigeria’s inflation inches to 8.3% on uptick in food component

Nigeria’s inflation year-on-year inched 0.1 percentage point in July to 8.3 percent on food prices which continues to see uptick since March 2014.
The National Bureau of Statistics (NBS) reported on Monday that this is the fifth consecutive month of year-on-year increases in the headline index.

“The faster pace of price increases recorded in the headline index were as a result of an increase in multiple divisions that contribute to the headline index”.

Between February and July, movements in food prices as observed by the food sub-index have mirrored the headline index, NBS said.

The food index edged higher to 9.9 percent in July from 9.8 percent in June.
This is the highest price increases observed in a year, and advancement in the pace of price increases for the fifth consecutive month and according to the NBS, increases in fruit, vegetables, and potatoes, yam & other tubers’ groups contributed to the price increases during the month.

But core inflation, which the Central Bank of Nigeria (CBN) continues to monitor closely with its tight monetary policy slowed for the third time in July.

In the consumer price index (CPI) report, the NBS noted that the “all items less farm produce” or core index, which excludes the prices of volatile agricultural products slowed in July after increasing for three consecutive months.

Prices declined to 7.1 percent in July, down from 8.1 percent in June. “This is the slowest price increase recorded since January this year,” the data office stated.

The increase in the core sub-index (month-on-month) was as a result of price increases across various group items in particular actual and imputed rentals for housing; non-durable household goods; clothing materials, other articles of clothing and clothing accessories; garments, and solid fuels groups.

The CBN last month retained key rates on concerns that inflationary pressure, which was marginally subdued since last year, had re-emerged since February.

The heightening concerns for monetary policy, Godwin Emefiele, CBN governor, said was about huge liquidity levels in the system and the trending uptick in inflation linked to poor harvest especially in the North Eastern and North Central states of the country.
Emefiele also noted then that core inflation continued to send conflicting signals since January 2014, warning that it could be a major factor in the upward trend in prices if the upward trend continues as observed in April 2014.

“Internally, the key risk factors include the high systemic banking system liquidity, elevated security concerns and anticipated high election-related spending in the run-up to the 2015 general elections,” Emefiele said, raising fears that “domestic liquidity could exert sustained pressure on both the exchange rate and consumer prices, as well as accentuate the already high demand for foreign exchange, further depleting the country’s external reserves.”

Emefiele had signaled a gradual reduction in interest rates on resumption, but analysts predict this is unlikely anytime soon, due to persisting inflationary pressure at the moment and especially as politicians gear towards commencing huge spending for 2015 general elections.