Uncertainty over inflation recovery despite improved food harvest

Possibilities of the nation witnessing a downward inflationary trend in the fourth quarter remain uncertain as widespread flooding incidence reported across food producing states and rising energy prices may further put pressure on the consumer price index.

According to the latest data from the National Bureau of Statistics (NBS) yesterday, the consumer price index, which measures inflation, stood at 11.28% in September from 11.28% recorded in August on a year-on-year basis.

Specifically, inflation sustained uptick for the second consecutive month in September after 18 consecutive months of decline.

Experts at Cordros Capital expressed optimism that the ongoing main harvest in the North and South to further exert downward pressure on food prices as supplies continue to flood the market.

The experts however expressed concerns that expected outcome will be limited by the widespread flooding incidence reported across food producing states.

“Elsewhere, in the face of increasing energy prices, we believe the NNPC will remain committed towards strategic supply of petroleum products to steer clear of fuel shortages, with the attendant impact leaving core inflation in check. Hence, we forecast month-on-month headline reading of 0.80% for October.

“On monetary policy, we reiterate that we do not expect the Committee to hike rate in the next policy meeting given the still fragile economic growth. However, we believe its hawkish rendition will reflect in OMO issuances through the rest of the year, as sustained foreign sell-offs of naira assets drives pent up demand for FX, with the CBN stepping up paper issuances to arrest speculative tendencies on the naira.”, they added.

On a month-on-month basis, the report showed that the Headline index increased by 0.84 percent in September 2018, down by 0.21 percent points from the rate recorded in August 2018 (1.05) percent.

“The urban inflation rate increased by 11.70 percent (year-on-year) in September 2018 from 11.67 percent recorded in August 2018, while the rural inflation rate increased by 10.92 percent in September 2018 from 10.84 percent in August 2018.

“On a month-on-month basis, the urban index rose by 0.86 percent in September 2018, down by 0.14 from 1.00 percent recorded in August, while the rural index also rose by 0.82 percent in September 2018, down by 0.14 percent from the rate recorded in August 2018 (0.96) percent.

“The composite food index rose by 13.31 percent in September 2018 compared to 13.16 percent in August 2018.”

However, the food sub-index was one percent in September compared to the 1.42% recorded in August 2018.

The food items that caused the increase in food inflation were caused by increases in the prices of potatoes, yam, vegetable, fruits, meat, milk, cheese, egg, bread, fish and cereals.