Inflation rate to climb to 11.39% in May – EIU, Access Bank

Motolani Oseni

Analysts at The Economic Intelligence Unit (EIU), Access Bank Plc said the nation’s inflation rate for May is expected to increase to 11.39 per cent from 11.37 per cent in April 2019 over seasonal factors and depreciation in Naira.

The Economic intelligence Group forecasted May 2019 inflation rate (year-on-year) to climb to 11.39 per cent, stressing that it methodology adopted an auto-regressive analysis of past prices, while it recognizes all the assumptions used by the National Bureau of Statistics (NBS) in its computation of monthly Composite Consumer Price Index (CCPI).

According to them, “We expect inflation to rise in May, partly reflecting seasonal factors, as well as a slight weakening in the currency which impacted the core index.

“In May, prices of food and non-alcoholic beverages, the largest component in the consumption basket (with a weight of 51.8 per cent) edged slightly higher.

“Specifically, the prices of food items such as Irish potatoes, tomatoes, beef, vegetable oil and milk rose in markets monitored in the month.

The pressure on food inflation can be attributed to the seasonal rise in demand for agricultural products associated with the Ramadan season.”

The National Bureau of Statistics (NBS) is scheduled to release the inflation figure for May 2019 on June 17, 2019, based on the data release calendar available on the Bureau’s website.

The National Bureau of Statistics (NBS) had reported 11.25 per cent inflation rate in March.

Inflation rate according to NBS closed February at 11.31per cent and 11.37per cent in January 2019.

Explaining further, they said, “At the NAFEX market, the value of the Naira depreciated by 0.008 per cent to close at N363.43/$ on May 31st from N363.40/$ in the prior month.

Similarly, at the parallel market, the Naira depreciated by 0.28 per cent to close at N361/$ from N360/$ in the same period.

“We see the likelihood of continued Open Market Operation (OMO) auction by the CBN to keep yields at relatively attractive levels that support healthy portfolio flows.

“The yields on the 3- and 6-month treasury bills settled at 10.59 per cent and 12.11 per cent respectively on May 31, compared with 11.19 per cent and 13.56 per cent in that order on April 30th, 2019.

On Monetary Policy Responses, Economic Intelligence Unit at Access bank said, “the Our expectation is that the CBN will maintain the benchmark interest rate at the existing 13.5 per cent against the backdrop of still fragile economic growth.

“With no change in the benchmark rate anticipated we expect the CBN to continue the issuance of OMO and stabilisation Securities with focus on sterilizing naira liquidity to reduce USD demand.

Last week, analysts at Financial Derivates Company Limited (FDC) and FSDH Research have predicted further increase in inflation rate for the month of May over raining season and security challenges in food producing states in the Northern part of the country.

Fitch Rating also projected that the nation’s inflation rate will average close to 12 per cent between 2019 and 2020.