MON, AUGUST 13 2018-theG&BJournal-The forecast for July 2018 is that Nigeria inflation will trend downwards again to 10.9%, much lower than the 11.23% recorded in June 2018.
The July report will be published by The National Bureau of Statistics (NBS) on August 15, 2018 and all indications are that the inflation drivers have so far maintained a decent temperament despite expectations that the release of fund for the 2019 budget will upset sentiments in the markets.
According to a survey by the Access Bank Economic Intelligence Group, prices for staple food commodities notably green pepper, tomatoes and tubers rose, reflecting lower supplies during the planting season – which lasts from mid-February to end of August. Meanwhile, processed foods, mainly beverages, nudged slightly lower, enjoying support from stable transport prices and wholesaler discounts aimed at liquidating excess inventory.
‘’ In July, prices of food and non-alcoholic beverages, the largest component in the CPI basket (with a weight of 51.8%) moved in mixed directions.’’
The Group noted that the stabilization of the naira (on both the official and the parallel rates) amid consistent CBN USD supply in its auctions kept the core index subdued in July. The local unit gained 0.55% to close at N360/$ at the parallel market at the end of July 2018 compared to N362/$ at the end of June.
Some of the items in the core index basket that benefited from the stability in the exchange rate include; fuel and lubricants for personal transport, books and stationeries, and vehicle spare parts.
‘’ Looking in more detail at the drivers, our analysis indicates that the downward trend in inflation rate in July was largely due to fairly stable food prices, as the increase in some food items was offset by decreases in the cost of others, and stability in the currency,’’ the Group said.
The lower inflation will likely influence the Central Bank of Nigeria (CBN) call on rates as it has in the past since inflation started trending downwards.
‘’We expect the CBN to adopt a relatively cautious stance when it comes to making cuts to avoid triggering weakness in the local currency and also to manage the expected boost in government spending from the 2018 budget,’’ says the Access Bank intelligence team.
Treasury bill yields are likely to contract further, as market players react to declining inflation. The yields on the 3- and 6-month treasury bills settled at 10.92% and 12.69% respectively on July 31st, compared with 12.76% and 13.07% in that order on June 29th.
‘’With no change in the benchmark rate anticipated, we expect the CBN to continue issuance of OMO and Stabilisation Securities with focus on curbing naira liquidity to reduce speculative USD demand.’’
