Why inflation rate may drop to 16.52% in March – Experts

As Nigeria Bureau of Statistics (NBS) is set to release the March 2017 Consumer Price Index (CPI) and Inflation report in about a week from now, some group of financial experts have given reasons why the anticipated inflation rate (year-on-year) report may drop to 16.52 per cent from 17.78 per cent recorded for the month of February.

For instance, experts at FSDH Research said their prediction was based on the slower increases in the food and non-food divisions which are more than previous months coupled with the base effect of the higher prices in the CPI in March 2016 and much than the current month.

The experts further stressed that the monthly Food Price Index (FPI) that the Food and Agriculture Organization (FAO) released shown that the Index averaged 171 points, 2.75 per cent lower than the revised value for February 2017, but 13.39 per cent higher than the March 2016 figure.

According to them, the drop in the value of the Index was mainly attributable to the sharp decline in the prices of sugar and vegetable oils.

Meanwhile, the FAO Sugar Price Index fell by 10.89 per cent in March 2017 on the heels of reports on improved supply conditions in the main sugar producing region of Brazil. The FAO Vegetable Oil Price Index was also down by 6.18 per cent.

But this was because of abundant exports of soy and palm oil in Southeast Asia, Indonesia and South America coupled with a favourable outlook for global supply in 2017/18.

Similarly, the FAO Dairy Index declined by 2.27 per cent majorly due to the fall in milk powder and cheese. Butter prices on the other hand, rose amid reduced exports. The FAO Cereal Price Index decreased by 1.81 per cent as a result of the fall in the prices of wheat, maize and rice. Good production prospects and sufficient supplies weighed on the prices. On the other side, the FAO Meat Price Index was up by 0.74 per cent as prices of bovine and pig meat increased due to firm import demand particularly from China.

On the analysis, it indicates that the value of the Naira depreciated at the inter-bank market, while it appreciated at the parallel market. The Naira lost by 0.28 per cent at the inter-bank market to close at US$/N306.35 while it gained 13.42 per cent at the parallel market to close at US$/N395 at the end of March. The decision of the CBN to increase Dollar supply led to the appreciation in the value of the Naira in the parallel market.

Although, the recent appreciation of the Nigerian local currency, naira influenced the drop in the prices of food at the international market, which consequently led to a drop in the prices of consumer goods in the country.

However, according to FSDH analysts, the prices of food items that were monitored in the month under review showed movement in varying directions, as the prices of garri; yam; beans; tomatoes and fish were up by 13.23 per cent, 12.04, per cent 6.67 per cent, 4.76 per cent and 0.74 per cent respectively.