FSDH Merchant Bank Limited, has predicted a drop in the rate of inflation (year-on-year) from 14.33 per cent recorded in February to 13.49 per cent in March 2018, according to a recent report released by its research team. This would mark the fourteenth month that prices have cooled.
The expected drop in inflation rate is premised on the base effect of higher prices in the Composite Consumer Price Index (CCPI) in March 2017 than the current month.
The Monetary Policy committee (MPC), on Wednesday left its repo rate at a record high of 14 per cent since July 2016 in its first meeting this year, after a political standoff between the executive and the senate, prevented a quorum for months.
The committee held its gun, in a bid to curtail spiralling inflation which soared to an 11-year high in April 2016, following a big naira devaluation and an upward review in the retail price of petrol.
“We expect the rate of inflation to cool 0.84 bps to 13.49 percent in March 2018,” FSDH said, ahead of an official release by the National Bureau of Statistics (NBS) on April 16.
The monthly Food Price Index (FPI) from the Food and Agriculture Organization (FAO) released shows that the Index was up 1.05 percent to 172.8 points in March from the revised value for February. The increase recorded in the FPI was because of a strong recovery in dairy and cereal prices.
The FAO Dairy Price Index appreciated by 3.26 percent in March as prices of butter, Whole Milk Powder (WMP) and cheese were on the increase. This increase was mainly supported by strong global import demand and lower than expected milk output.
The FAO Cereal Price Index was also up by 2.67 percent from February. The sustained increase recorded in the cereal price Index is as a result of the rise in the prices of most of the major cereals.
The FAO Meat Index was up by 0.32 percent driven by the increase in the prices for ovine meat, pig meat and poultry meat.
On the flip side, the FAO sugar Price Index dropped by 3.4 percent. The drop in the Index is on the heels of favourable supply conditions in the main sugar producing regions, and a weaker Brazilian Real. The FAO Vegetable Oil Price Index was down by 0.77 percent as soy, rape and sunflower oils prices dropped
The naira remain stable at the parallel market, but gained 0.08 percent at the inter-bank market to close at US$/N305.65 from US$/N305.90 at the end of February.
FSDH said that “the appreciation recorded at the inter-bank market between the two months under review moderated the impact of the imported consumer good prices in the domestic market”.
The prices of most of the food items in March 2018 recorded moderate appreciation, leading to 1.12 percent increase in Food and Non-Alcoholic Index.
The Index increased by 16.31percent from 229.71 points recorded in March 2017.
Furthermore, there was increase in the prices of Transport and Housing, Water, Electricity, Gas & Other Fuels divisions between February and March.
“We estimate that the increase in the CCPI in March would produce an inflation rate,” FSDH said.
MICHEAL ANI
