The National Bureau of Statistics (NBS) said in its Consumer Price report released on Tuesday that Nigeria’s inflation moderated to 8 percent in November, some 0.1 percentage points from 7.9 percent in October, making it the 24th consecutive month that the headline numbers would stay within single digit.
The moderation in consumer prices moved against widely held projections of an immediate upsurge in inflation following the Central Bank of Nigeria’s (CBN) devaluation of the naira and hike in lending rates last November.
Food prices continued to moderate in four consecutive months to November but edged slightly higher in December as a result of the festive period. This saw food sub-index inch slightly to 9.2 percent (year-on- year) up from 9.1 percent recorded in November.
“This was the first uptick in rates of food prices observed in four months,” the Bureau stated, adding that while on a month-on-month basis, the highest price increases were recorded in the fish, “potatoes, yams and other tubers”; meat, and “coffee, tea and cocoa” groups, the food sub-index was weighed upon by slower rises in the bread and cereals, oil and fats, and fruits groups.”
The CBN will next week Monday/Tuesday hold its first Monetary Policy Committee in the year to review rates, after it adjusted the naira official exchange rate from N155/US$ to N168/US$ in November.
The CBN at the time also widened the band around the midpoint by 200 basis points from +/-3 percent to +/-5 percent to save the embattled naira, and safeguard the dwindling foreign reserves.
For the first time in years, the CBN also raised the Monetary Policy Rate – the MPR by 100 basis points from 12 percent to 13 percent. But the symmetric corridor of +/- 200 basis points around the anchor rate was, however, maintained.
The Cash Reserve Ratio (CRR) on private sector deposits was raised by 500 basis points from 15 percent to 20 percent with immediate effect, while the public sector CRR was left at its current level of 75 percent.
Analysts said that the CBN’s decisions would result in an inflation uptick, especially the core aspect which would ease over time.
But figures released by the NBS showed that the pace of increases in the “all items less farm produce” or core index, which excludes the prices of volatile agricultural products rather slowed in December, after increasing at the same pace for the previous four months. Core inflation went down from 6.3 percent in November to 6.2 percent in December, the figures show.
“The highest increases were recorded in the wine, carpets and other floor coverings; miscellaneous services relating to the dwelling and garments groups,” the NBS stated, adding that while prices increased in most divisions that contribute to the core sub-index, slower increases were recorded in the communication and recreation and culture groups.
The CBN governor, Godwin Emefiele, had, however, expressed optimism that the headline inflation would stay with single digit range within 2014 even with the tightening measures.
Analysts say the moderation in the three major indices of inflation (headline index, core index and the food index) in Nigeria in 2014 will be met by great cheers within the fiscal and monetary circles. The stability of consumer prices in 2014 is attributable to both the CBN tight monetary policy stance throughout the year as well as improved agricultural output which stabilised food prices.
Nevertheless, the headwinds on consumer prices which stemming from the precipitous decline in crude oil prices and consequent likelihood of further devaluation should keep authorities on their toes, they said. “Hence, we do not expect a deviation from the CBN’s tight monetary policy stance as it convenes for the first time in the year in 2015 next week between 19th and 20th January 2015. Our expectation anchors on the increased volatility in the CBN’s second nominal anchor of monetary policy — exchange rate which may further require tightening cycles if the decline in the crude oil prices persists.”
