Analysts at Afrinvest West Africa Limited, an investment bank, have said that inflation rate will remain at double digit in the mean time.

The analysts, in a flash note made available to our correspondent on Friday has said. Afrinvest Research identifies the new tariff regimes on certain food imports and the partial removal of subsidies on premium motor spirit as key contributors to the increase in Consumer Price Index.

“Nigerians should expect it to remain at double digit figure in the near time. We also note that the upward adjustment to aggregate fiscal spending by the House of Assembly and the expected increase in electricity tariffs by June this year are factors that pose near term threats to inflation”.

The analysts noted that the increase in headline inflation would reduce positive real returns on the fixed income and money markets in the near term, while a resurgent Nigerian equity market could encourage asset reallocation for investors looking for higher returns.

“We believe inflation will increase month-on-month in the near term, but expect a lower year-on-year figure for May 2012 on account of a significantly high base in May 2011,” the note stated.

The National Bureau of Statistics, last week, reported Nigeria’s April headline inflation at 12.9 per cent year-on-year, an 80 basis points rise from the 12.1 per cent recorded in March 2012.

According to the report, food inflation dipped by 60 points to 11.2 per cent year-on-year from 11.8 per cent. Core inflation, which is measured by All Items Less Farm Produce Index, also dropped to 14.7 per cent year-on-year from 15 per cent in March 2012.

Month-on-month, inflation increased marginally by 0.1 per cent, driven largely by an increase in the prices of certain non-food items, such as transportation, electricity and other fuel.

The marginal increase in food inflation was caused by a persistent rise in imported inflation, as the imported food index moved up from 129.9 per cent in March 2012 to 131.3 per cent.

According to the note, Nigeria’s high import dependence on rice, wheat and raw sugar, among many other items, kept it adversely exposed to the volatility in global commodity prices.

It added that the relative stability in the exchange rate in recent times had helped immensely in moderating this risk.

Source: Punch/Ademola Alawiye