Nigeria’s inflation eased to 13.34 percent, year-on-year in March 2018, amid base effect and declining petrol prices, which is the lowest inflation rate since March 2016.
It is also the fourteenth consecutive disinflation since January 2017, as compiled from the National Bureau of Statistics (NBS).
The rate moderated by 0.99 percentage points in March from 14.33 percent recorded in the previous month. Although, the 13.34 percent inflation rate recorded in the period under review remains well above the 6-9 percent preferred band.
“The slowdown in inflation is as a result of a combination of factors; largely reflecting base effect with stable currency backdrop and sliding gasoline prices,” Wale Okunrinboye, a Lagos-based Fixed Income and Research Analyst told BusinessDay on phone.
The steady supply of Premium Motor Spirit (PMS), normally referred to as petrol, was said to have been a catalyst to the moderation in inflation rate.
“The relative stability in crude supply due to the tackled challenges of fuel importation and distribution experienced few month ago, led to reduction in petrol prices in March. This reflected in the prices of transportation and cost of moving goods around the country. It however then led to decline in inflation rate,” Ayo Akinwumi, Head of Research FSDH Merchant Bank said.
“It is a major positive surprise, although the base effect also played a role, considering the high rate recorded last year,” Tajudeen Ibrahim, Head of Research at Chapel Hill Denham Securities said.
According to a previous NBS report on Wednesday 11 2018, there was -5.3 percent decline in the price of petrol on month-on-month comparison.
Nigerian consumers paid an average of N163.4 per litre for the product in March, N9.1 less than the N172.5 in February 2018. This is however, against the official government pump price of N145 per litre. Although, there was a 9.4 percent increase, year-on-year, as seen in NBS figures.
The Consumer Price Index (CPI) measures the average change over time in prices of goods and services consumed by people for day- to- day living and as such, the CPI measures inflation.
Inflation on the other hand is the rate at which the prices of goods and services are rising.
Expectations of two analysts polled in a BusinessDay survey expect the rate to hit a single digit in the Full Year of 2018 on the benchmark of declining fuel prices.
“Petrol prices do not seem to be a thing to worry about again, therefore, the inflation rate is likely going to be at a single digit in Full year of 2018,” Okunrinboye said.
“Inflation will come to a single digit in full year of 2018,” Tajudeen added.
The Monetary Policy Committee (MPC), in its first meeting of the year held in April 3-4 2018, left its key interest rate at a record high of 14 percent to fight inflation as its awaits confirmation from data of deceleration in the headline CPI in Africa’s largest economy.
The CBN governor Godwin Emefiele said the decision to retain the policy rates was geared at fighting inflation.
Meanwhile, inflation rate at 13.34 percent is now lower than the benchmark rate of 14 percent. This means the real interest rate has taken a positive trajectory by 0.66 percentage points.
“This means that the CBN will likely be able to cut interest rate by say 100 to 200 basis points over the second or third quarter of 2018,” Okunrinboye said.
A further break down of the inflation report released Thursday, shows the Composite Food Index rose by 16.08 percent (year on year) in March 2018, down from the rate recorded in February (17.59 percent).
On a month-on-month basis, the Food sub-index increased by 0.90 percent in March 2018, up by 0.05 percent points from 0.85 percent recorded in February.
The average annual rate of change of the Food sub-index for the twelve-month period ending March 2018 over the previous twelve month average was 19.29 percent, 0.23 percent points from the average annual rate of change recorded in February (19.52) percent.
The rise in the food index was caused by increases in prices of Bread and cereals, Fish, Oil and fats, Vegetables, Fruits, Coffee, tea and cocoa, Meat, milk, cheese and eggs.
The ”All Items less Farm Produce” or Core inflation, which excludes the prices of volatile agricultural produce, rose by 11.2 percent in March 2018, down by 0.5 percent points from the rate recorded in February (11.7) percent.
On a month-on-month basis, the Core sub-index increased by 0.84 percent in March 2018, higher by 0.09 percent when compared with 0.75 percent recorded in February.
The average 12-month annual rate of change of the index was 12.33 percent for the twelve-month period ending March 2018; this is 0.34 percent points lower than 12.67 percent recorded in February.
In March 2018, all items inflation on a year on year basis was highest in Bauchi, Kebbi and Nassarawa states with 16.38 percent 16.36 percent and 16.33 percent respectively, while Kwara with 10.30 percent, Kogi with 10.87 percent and Delta with 11.17 percent recorded the slowest rise in headline Year on Year inflation.
ENDURANCE OKAFOR
