REPORT | Inflation Inches Downwards to 17.24% in April – NBS

For three consecutive months, the Consumer Price Index (CPI), which measures inflation rate has continued to decline, figures released by the National Bureau of Statistics (NBS) have indicated.

The NBS said the CPI or  inflation rate dropped to 17.24 per cent (year-on-year) in April, declining by 0.02 per cent from the figures recorded in March, 2017.
The rate had dropped from 17.78 per cent in February to 17.26 in March, having stood at  18.72 per cent in January

“This is the third consecutive month of a decline in the headline CPI rate, exhibiting effects of some easing in already high food and non-food prices, as well as favourable base effects over 2016 prices.

“Increases were recorded in all Classification of Individual Consumption by Purpose (COICOP) divisions that yield the Headline Index. The top items to have recorded the highest year- on-year increases across all the divisions were solid fuels, bread and cereals, meat, liquid fuels, clothing materials, other articles of clothing and clothing accessories, and fish,” the statistical agency said in its inflation report for April, 2017.

However, on a month-on-month basis, the headline index increased by 1.60 per cent in April 2017, a 0.12 per cent points lower than the rate recorded in March (1.72 per cent).
The NBS figures indicated that the highest price increases were recorded more in the food items segment such as coffee, tea and cocoa, potato, yam and tubers, bread and cereals, milk cheese and eggs as well and meat and fish.

The data showed that the rate for food year-on-year was 18.44 per cent in March and 19.30 per cent in April.
The Headline Index is made up of the Core Index and Farm Produce items.
Processed foods are included in both the Core and Food sub-indices;  Implying that these sub-indices  are not mutually-exclusive.

The Urban index rose by 17.62 per cent (year-on-year) in April from 18.27 per cent recorded in March, while Rural index increased by 16.69 per cent in April from 16.47 per cent in March.

On month-on-month basis, the urban index rose by 1.61 percent in April from 1.76 percent recorded in March, while the rural index rose by 1.59 per cent in April from 1.69 percent in March.

The corresponding twelve-month year-on-year average percentage change for the urban index increased from 18.79 per cent in March to 18.98 per cent in April, while the corresponding rural index also  increased from 16.05 per cent in March to 16.69 per cent in April.

Meanwhile, average price paid by consumers for premium motor spirit (petrol) decreased by 7.9 per cent year-on-year and increased by 0.3 per cent month-on-month to N149.9 in April, NBS said.
States with the highest average price of PMs consumption  were Borno and Kebbi (N160.3,), Bayelsa (N159.1) and Taraba (N158.6)

States with the lowest are Oyo N145.3 and On do N145.2.
Reacting to the latest inflation figures, the Financial Derivatives Company Limited (FDC), noted that commodity prices remained sticky downwards. This, to analysts at the Lagos-based research and financial advisory firm was driven by two important factors.

“Firstly, was corporates aim to recover losses and cuts made to profit margins sustained for months.  Although the CBN has been consistent with its injections into the FX market, prices of many goods have remained stubbornly high. Secondly, output growth, although recovering as seen with improved PMI numbers, remains below accelerated levels needed to force prices downwards.

“This is attributed to the new trend of naira illiquidity, subdued levels of capital expenditure and a still fundamentally flawed exchange rate market. Our analysis leads us to believe that waning base year effects is losing its potency in steering inflation trajectory and as such the month of May is to be driven solely by supply and demand side factors,” FDC stated.
The Monetary Policy Committee is expected to hold next week and the FDC anticipates that a status quo on monetary parameters would be sustained.

“The planting season is still in play; the effect of policy induced shortages on some key commodities continues to linger (beans and rice). The Ramadan fast will commence soon and we expect food prices to also increase. Finally, the 2017 budget has been passed and awaiting presidential assent. We expect budgetary disbursement to have demand-pull effect on consumer prices,” they added.

On his part, the CEO of Cowry Assets Management Limited, Mr. Johnson Chukwu, who spoke in a telephone chat, pointed out that  inflationary pressures persists in the country in spite of the moderate decline in year- on-year inflation.

“So, I think there is a lot to be done to tame inflation in the country. A lot of work still needs to be done to further stabilise the macroeconomic environment,” Chukwu added.
Also, the acting  Managing Director, Afrinvest Research Limited, Ayodeji Ebo, said the marginal drop in April inflation rate may not have any effect on fixed income and interest rate.

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