Food products on display in the market
Nigeria’s composite consumer price index (CPI), which gauges inflation rate, dropped to 12 per cent in December 2012, from 12.3 per cent the previous month.
This development will be among factors to be considered at the Monetary Policy Committee (MPC) meeting which holds on Monday.
But core inflation, which excludes items with volatile price movements such as food products, increased for the second consecutive month to 13.7 per cent from 13.1 in November, according to the last CPI figures that were released by the National Bureau of Statistics (NBS) Thursday.
It stated that on a year-on year basis, higher prices in the core index had caused a relative increase in the headline index in the period under review.
However, food prices moderated during December, thus providing temporary respite from the lagged effects of the floods which occurred from July to Mid-October, as well as other demand and supply conditions, the NBS said.
Year-on year, the food index fell to 10.2 per cent from 11.6 per cent in November.
Meanwhile, the urban inflation rate dropped to 14.5 per cent year-on-year in December from the 15.8 per cent in the previous month while the rural index increased by 0.4 percentage points to 10.2 per cent on a year-on-year basis.
According to the NBS, on a month-on-month basis, the Urban All-item index increased by 0.8 per cent from levels recorded in November, while the Rural All Items index increased by 0.7 per cent between November and December.
“The percentage change in the average composite CPI for the twelve-month period ending December 2012 over the average of the CPI for the previous twelve-month period was recorded at 12.2 per cent,” it said.
In line with target of achieving single-digit inflation rate, the CBN had adopted tight monetary policy conditions since last year. Some of these include leaving the Monetary Policy Rate (MPR) at 12 per cent as well as the periodic mop up of excess liquidity from the system.
But, commenting on the latest inflation figures, Head, Regional Research, Africa, Standard Chartered Bank, Razia Khan, said it would be interesting to see if the downward trend could be sustained, given that the 2.4 per cent drop in inflation had largely been driven by a base effect.
She said: “Come January, we expect to see an even sharper deceleration in headline year-on-year inflation, to about 10.5 per cent year-on-year or thereabouts – mainly driven by the base effect from the brief episode of full fuel price deregulation last year.
“In order to adjust monetary policy however, the MPC will need to be more certain that lower inflation can be achieved on a sustainable basis.”