Inflation seen falling first time in 16 months

Nigeria’s headline inflation is expected to decline for the first time in 16 months when the NBS releases the numbers next week.

According to a report by Financial Derivatives company, this forecast is based on a regression model and empirical analysis.

Headline inflation spiked to 18.72% in January as a result of an unexpected jump in food inflation and the impact of record high diesel price at N275 per litre..

The fundamental reason for the expected decline is the impact of significant developments in February 2016 (base year effects).

In February 2016, distortions in the forex market led to a significant jump in CPI, beginning a trend that lasted for several months. February 2017 has been relatively stable compared to last year; hence we expect a moderation in the increase in CPI from 4.18 in 2016 to 2.0 in 2017.

This means that a new trend of declining inflation is on the horizon. This new trend is observed amongst a number of Nigeria’s sub-Saharan African peers like Angola and Malawi. It is noteworthy that the anticipated decline in the February numbers does not mean that prices will decline.