National Bureau of Statistics, NBS, yesterday, said inflation rate dropped to 17.26 per cent in March, due to stability of already high prices of goods and services as well as impact of recent appreciation of naira.
The decline in inflation rate from 17.78 per cent in February represents the second consecutive decline in two months, after 15 months of increase from eight per cent in December 2014 to 18.62 per cent in January.
According to the NBS March inflation report: “On a Headline basis, the Consumer Price Index, CPI, which measures inflation, increased by 17.26 percent (year-on-year) albeit at a slower pace in March 2017, 0.52 percent points lower from the rate recorded in February (17.78) percent.
“This is the second consecutive month of a decline in the headline CPI on a year-on-year basis, representing the effects of stabilizing prices in already high food and non-food prices as well as favourable base effects over 2016 prices.
“It is also indicative of early effects of a strengthened naira in the foreign exchange rate market.”
“Price Increases were recorded in all COICOP divisions that yield the Headline Index.
However, the major divisions responsible for accelerating the pace of the increase in the headline index were Housing, Water, Electricity, Gas and Other Fuel, Education, Food and Alcholoic Beverages, Clothing and Footware and Transportation Services.
On a month-on-month basis, the Headline index increased by 1.72 percent in March 2017, 0.23 percent points higher from the rate recorded in February.
“The Food Index increased by 18.44 percent (year-on-year) in March, slightly down 0.09 percent points from rate recorded in February (18.53) percent driven by increases in the prices of bread, cereals, meat, fish, potatoes, yams and other tubers and wine, while the slowest increase in food prices year on year were recorded by Soft Drinks, Fruits, Coffee, Tea and Cocoa.
“Price movements recorded by All Items less farm produce or Core sub-index rose by 15.40 percent (year-on-year) in March, down by 0.60 percent points from rate recorded in February (16.00) percent.”
Commenting on this development, analysts at Financial Derivatives Company Limited predicted that the decline in inflation will persist this month. They stated: “
The current decline in inflation rate due to base year effects is expected to continue in the following months. The 60-90 day transmission lag of the Central Bank of Nigeria (CBN’s) intervention in the forex market should manifest in April. However, power output from the grid has declined below 3,000 MW in mid April. Diesel prices are inching up. These will taper the impact of base effects on consumer price levels in the coming months. The slowing inflation and a focus on growing the real economy may persuade the MPC to hold policy rates despite negative real interest rates and currency depreciation pressures.”