Inflation Rate Predicted to Drop Further


Obinna Chima

Analysts at FSDH Merchant Bank have anticipated a year-on-year drop of inflation rate to 14.31 per cent in February 2018, from the 15.13 per cent recorded in January 2018.

The expected decrease in the inflation rate was largely attributable to the base effect of previous year. In addition, they noted the decrease in some major food prices, as well as the slowdown in the price movement in some categories of non-food items in the Consumer Price Index (CPI) basket.

“The prices of most of the food items we monitored in February 2018 increased marginally, leading to 0.80 per cent increase in our Food and Non-Alcoholic Index. “The Food and Non-Alcoholic Index increased by 17.50per cent, from 224.77 points in February 2017,” the firm added in a report.

FSDH Research noted a potential increase in local prices of imported food items because of the faster than expected increase in international food prices. This may have negative impact on inflation rate going forward.

It put its revised average inflation rate forecast for 2018 at 10.76 per cent, lower than 16.55 per cent recorded in 2017.

“However, we maintain that the yields on the FGN Bonds will rise, in the short-term, higher than the current levels.

“The major drivers are increase in the interest rate in advanced economies and the strategy of the Debt Management Office (DMO) to restructure the public debt in favour of longer-tenored instruments,” the report added.

In another development, FSDH observed a slowdown for the Purchasing Managers’ Index (PMI) for the second consecutive month.

This was contained in the latest PMI report that the Central Bank of Nigeria (CBN) published for the month of February 2018. Although the PMI figures were above 50 points, the slowdown, according to FSDH may reflect the rising uncertainties in the country.

“Some businesses have expressed concerns over the rising social unrest in some parts of the country and delays in fiscal and monetary policies announcement. “Policy makers and economic mangers in the country need to pay urgent attention to the declining trend in the PMI to nip it in the bud,” they added.