Financial Derivates Company (FDC) Limited has said inflation rate in September may likely to spike to 11.22 per cent, attributable to closure of the Seme border by the federal government to curb inflow of imported rice, others.
The company in its report noted that the increase in inflation rate is coming after three months of consecutive decline.
FDC report on Wednesday said, “This spike in the general price level would be driven partly by the closure of the Seme border which has resulted in shortages of smuggled commodities especially rice, turkey, chicken and baking margarine.
“The price of a 50kg bag of rice increased by almost 30 per cent to N24, 000 per 50kg in September from N18, 000 per 50kg in August. Also, consistent with this, is the monthly inflation which is projected to increase by 0.02per cent to 1.01per cent (12.87per cent annualized).”
According to National Bureau of Statistics (NBS), inflation rate in January was 11.37 per cent but dropped to 11.31 per cent in February.
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It dropped further to 11.25 per cent in March but increases significantly to 11.37 per cent in April and increased further to 11.4 per cent in May, amidst the 2019 general elections.
The bureau disclosed that inflation rate dropped to 11.22 per cent in June and closed July at 11.08 per cent and August, 11.02 per cent.
However, the report by FDC explained that the core sub-index (inflation less seasonalities) is likely to decline to 8.60per cent from 8.68per cent in the month of August, supported by the stability of the exchange rate. The naira was relatively stable within a band of N358-N360/$ in the parallel market during the period.
“Broad money supply grew by 5.65per cent in the month of August as stated in the Monetary Polcy Committee (MPC) communique.
Likewise, credit to the private sector rose by 2.22per cent to N24.83trillion during the period, due to the mandatory 60per cent Loan to Deposit (LDR). Also, there was a decline in lending rates (18-20per cent pa).
“The exchange rate was relatively stable across all market segments in September, supported largely by the CBN’s continuous intervention in the foreign exchange market (an increase of 7.25per cent to $845.11billion).
“However, the frequency and amount of intervention in subsequent months could be limited by the steady depletion of the gross external reserves.
The gross reserves lost approximately $2.09billion in the last month, now at $41.52billon.“FBN’s Purchasing Managers Index (PMI) reading was up 5.3 points to 56.2 points in August.
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This reflects an improvement in manufacturing sector activities and is an indication of higher output.
“In a bid to boost lending to the private sector, the CBN raised the LDR by 60 per cent to 65per cent”, the Lagos based the company added.
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