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Nigeria’s headline inflation eases to 11 month low of 11.22% in June as food price drops

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Nigeria’s inflation rate rose at a slower pace in June to the lowest level in eleven month fuelled by decline in core inflation and moderation in food prices, data released by the National Bureau of Statistics (NBS) on Monday have revealed.

The Composite Price Index (CPI), which is a measure of the general change in the prices of consumer goods and services purchased by households over a period, rose by 11.22 percent on a year-on-year basis in June 2019.

This represents 0.18 percentage points lower than the rate recorded in May 2019 (11.40) percent and the lowest inflation rate recorded by the country since June 2018 when inflation rose by 11.23 percent.

“Core Inflation maintained downward trend in absence of any major shock in key CPI components like Power and Energy costs. Stable exchange rate has provided further support to core inflation decline,” Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL Stockbrokers said.

A dive into the data by the state funded bureau revealed that food inflation slowed to the lowest in three month by 13.56 percent in June from a year earlier compared with 13.79 percent recorded in May. Also, core inflation, which captures all items, but exempts the prices of volatile agricultural produce, moderated to 8.8 percent to reach its lowest level in over three years.

The composite food index stood at 13.56 percent in June compared to 13.79 percent in May 2019. The rise in the food index was caused by increases in prices of Bread and cereals, Meat, Oils and fats, Potatoes, yam and other tubers, Fish, Vegetables and fruits.

“On food inflation, we are gradually going into the harvest season when food prices moderate, thus I think we are seeing the impact of some early harvests,” Akinloye told said.

A further probe into the data by the state stat showed that on month-on-month basis, the country’s headline inflation increased by 1.07 percent in June 2019, and 0.04 percentage points lower than the rate recorded in May 2019 at 1.11 percent. The food sub-index increased by 1.36 percent in June from 1.41 percent the previous month while core inflation increased by 0.85 percent from 0.75 percent recorded in May 2019.

FSDH Research, a subsidiary of FSDH Merchant Bank had projected in its July edition of its monthly economic and financial market report that the June 2019 inflation rate was going to drop to 11.32 per cent.  That is 0.1 percentage points more than the actual rate reported by NBS for the month under review.

However, at the current level, the nation’s headline inflation remains higher than the threshold of 6 percent to 9 percent set by the Central Bank of Nigeria (CBN). The index has remained in the double-digit trajectory since February 2016 when it rose 11.38 percent.

The urban inflation rate increased by 11.61percent (year-on-year) in June 2019 from 11.76 percent recorded in May 2019, while the rural inflation rate increased by 10.87 percent in June 2019 from 11.08 percent in May 2019.

On a month-on-month basis, the urban index rose by 1.10 percent in June 2019, up by 0.05 from 1.15 percent recorded in May 2019, while the rural index also rose by 1.05 percent in June 2019, up by 0.02 from  the rate recorded in May 2019 (1.07) percent.

Financial Derivatives Company (FDC), a Lagos-based research firm had also said in its monthly economic update that the “sharp increase in the monthly general price level suggests that inflationary pressures are intensifying.” Hence, the firm expected the “rising inflation trend to be sustained” in June and in the months to come.

In June 2019, all items inflation on year on year basis was highest in Bauchi (15.40%), Kebbi (14.73%) and Kaduna (13.91%), while Delta (9.46%), Kwara (9.01%) and Bayelsa (8.56%) recorded the slowest rise in headline Year on Year inflation.

On month on month basis however, June 2019 all items inflation was highest in River (2.28%), Lagos (1.72%) and Cross River (1.57%), while Bayelsa (0.42%), Kaduna (0.37%) and sokoto (0.31%) recorded the slowest rise.

Recall that in June 2019, the Economic Community of West African States (ECOWAS) approved the adoption of the ECO (ECOWAS single currency) to take effect from January 2020. But a single digit inflation of 5 percent or less as one of the criteria for each member country stands as a threat to achieving the goal.