After a massive leap in inflation for the month of February 2016, economy analysts are seeing a further rise to range between 11.76 to 12.1 per cent amidst cost-push rises in consumer prices across the country in the last one month.
Inflation rate had risen in February to 11.38 from 9.6 per cent in January, a 1.77 percentage point surge, the steepest in recent times with the National Bureau of Statistics and independent analysts attributing the rise to cost pressures arising from pass-through effects of foreign exchange crises in the economy, which in turn pushed import components of the inflationary measures very high.
This time analysts are seeing the effect of the prolonged energy crises in the country as major contributor to the cost pressures in March, leading to a third consecutive monthly increase in inflation rate this year.
As a result economists at Financial Derivatives Company Limited, FDC, run by one of Nigeria’s notable economists, Bismark Rewane, stated “we are projecting a significant increase of 0.7 per cent in the March inflation number to 12.1 per cent”.
They explained “the month of March was unique as the fuel scarcity intensified and higher transport costs filtered through to commodity prices such as beans, tomato and pepper.
“While our initial time series analysis projected an increase of 0.4 per cent, the severity and longevity of the prevailing fuel scarcity has distorted price levels.
“Our retail study showed that prices of many consumer goods have remained stubbornly high and in some cases increased in spite of consumer resistance.
“The factors that are contributing to the spike in inflation include seasonality, cost push factors, money supply and foreign exchange shortage.
“These factors while transient in nature are becoming more permanent. As these factors grow increasingly embedded, they are making consumers panic.
“Anticipated inflation is more important because of the pass through effect of increased demand and expectations of higher prices on current prices”. FDC economists also stated that the dichotomy between urban and rural prices may persist given the impact of rising transport costs and exchange rate pressures on urban prices.
A little more conservative in its own analysis and forecast, economists at FSDH Merchant Bank Limited stated “we expect the March 2016 inflation rate to increase to 11.76 per cent from 11.38 per cent recorded in the month of February 2016.
“We expect the increase in the inflation rate to come from increase in transportation cost and food and beverages as a result of the shortage in fuel supply. They however, added that other factors that would drive inflation rate are include the implementation of the new electricity tariff and the impact of the weak foreign exchange rate on imported goods.
The Food Price Index, FPI, that the Food and Agriculture Organization, FAO, released last week shows that the FPI was up 1.0 per cent in March. The increase recorded in the FPI was because of a strong recovery in sugar prices and increase in vegetable oil prices. The increases in both sugar and vegetable oil were more than enough to offset the plunge in dairy prices.
FSDH economists stated “our analysis indicates that the value of the Naira remained stable at the inter-bank market while it appreciated at the parallel market.
“The appreciation recorded at the parallel market between the two months under review moderated the impact of the imported consumer good prices in the domestic market”. They further informed that “the prices of most of the food items that FSDH Research monitored in March 2016 increased.
“The prices of tomatoes, rice, vegetable oil, beans, yam and meat increased by 15.56%, 11.11%, 7.59%, 6.67%, 4.76%, and 1.11% respectively. However, the prices of onions, Irish potatoes, fish and garri fell by 16.19%, 5.56%, 4.71% and 3.61% respectively”.
According to their research prices of sweet potatoes and palm oil remained unchanged. However they stated “the movement in the prices of food items during the month resulted in 0.95 per cent increase in our Food and Non-Alcoholic Index to 191.70 points. We also noticed increases in Transport, Housing, Water, Electricity, Gas & Other Fuels Transport divisions between February and March 2016.
‘’Our model indicates that the price movements in consumer goods and services in March 2016 would increase the Composite Consumer Price Index, CCPI, to 188.23 points, representing a month-on-month increase of 1.26 per cent. We estimate that the increase in the CCPI in March will produce an inflation rate of 11.76 per cent”. Vanguard
