Nigeria’s weak naira, currently trading between N197 and N200/$ at the interbank market, continues to pressure on consumer prices, causing inflation to move up for the fourth consecutive month in March to 8.5 percent from 8.4 percent the previous month.
“This is the fourth consecutive month of a faster increase in the headline index to reach the highest inflation rate recorded for the year,” the National Bureau of Statistics (NBS) noted in its latest Consumer Price Index report.
The headline rate for March also equals last year’s high recorded in August- and according to the NBS, while the pace of increase in food prices held firm for the second consecutive month, the faster increase in the headline index was driven by increases in the non-food COICOP divisions which was also reflected in the core sub-index.
Headline inflation has remained within the 6.0—9.0 percent band established by the CBN for close to years now but gradual rise driven mainly by exchange rate-induced high prices of imported (processed) food and output supply shocks is a concern to the central bank which kept rates steady at its last MPC meeting in March.
The underlying inflationary pressure comes largely from food (particularly imported food) and the core components, noting major risks to inflation to include elevated aggregate spending in the run-up to the just concluded 2015 general elections.
The likely higher import prices on the strength of an appreciating dollar and possible food supply shocks linked to insurgency and insecurity in some major agricultural zones of the country are also observed traits by the apex banking regulator.
Food prices as observed by the food sub-index increased at relatively the same pace in March as in February-by 9.4 percent, the NBS reported.
But the pace of such increases was weighted upon by a slower increase in the bread and cereals, oils and fats, dairy and confectionary groups.
Faster increases were observed in all other groups which contribute to the food sub-index.
The pace of advances recorded by the “all items less farm produce” or core sub-index increased for the third consecutive month in March.
The core inflation rose 0.5 percentage points from 7.0 percent recorded in February to 7.5 percent, the NBS stated.
“Prices increased at a faster pace in most divisions that contribute to the core sub-index except for the communications and recreational and culture divisions which increased at a slower pace.”
Godwin Emefiele, CBN governor, is, however, hopeful that the prevailing tight monetary policy stance and some of the recent administrative measures would among others help to lock-in inflation expectations and further stabilise the naira exchange rate.
