Nigeria’s inflation rate is expected to moderate to 11.32 percent in June from 11.40 percent recorded in May 2019, according to FSDH Research, an arm of the FSDH Merchant Bank Limited.
“Our analysis shows that the inflation rate will remain within the current region in the short-term if there is no shock,” Ayodele Akinwunmi, the firm’s head of research, said.
The Central Bank of Nigeria (CBN) targets single-digit inflation rate for the Nigerian economy and reiterated the desire to achieve that target in the five-year plan it released a few weeks ago.
“In other words, any inflation rate in double-digit is considered high in our view,” Akinwunmi said in Lagos on Friday in his presentation on monthly economic and financial markets outlook titled, ‘5-Year Policy Thrust of the Central Bank of Nigeria 2019-2024: Implications for the Financial Market’.
Given recent developments in the country, particularly in the agricultural sector, and farmers’ inability to move their produce to the market efficiently, it may be difficult to achieve a single-digit inflation rate in 2019.
While the CBN is deploying strategies to influence the amount of money in circulation in a manner that will not be inflationary, the company believes there are other key causes of high inflation in Nigeria which the CBN’s current policy may not be able to address.
The price monitor that FSDH Research conducted on food and non-food items shows prices moved in varying directions in June compared with May. While the prices of some consumer goods increased faster in June compared with May 2019, the prices of a few consumer goods increased slower in June than in May.
The National Bureau of Statistics is due to release the actual figure for the month of June on Sunday, 14 July 2019. The preliminary investigations of the firm show that the local prices of imported goods increased marginally in June over May because of the exchange rate adjustment on import duties.
However, the marginal increase was not enough to accelerate the inflation rate. The Food Price Index that the Food and Agriculture Organisation (FAO) of the United Nations published for the month of June 2019, shows that the prices of dairy products and oils declined significantly. The prices of meat, cereals and sugar, however, increased on the international market. Most of the decreases recorded on the international market were mainly as a result of increased export availabilities and limited import demand.
In the June edition of its monthly Economic and Financial Market Report, FSDH Research reviewed the five-year policy trust of the CBN and the implications for the financial market and outlines the opportunities.
With the implementation of these priorities, the firm said more funds would be available to finance non-oil export-led sectors. This should create new businesses, reduce import dependency, grow foreign exchange earnings, ensure stable exchange rate and possibly cause the value of the currency to remain stable to appreciate.
However, the firm said these policies would require complementary fiscal policies and actions to achieve the desired objectives.