Financial analysts have said that Nigerians should expect an increase in inflation rate in coming months, pointing to global increase in food prices as a contributor.

Analysts at Financial Derivatives Company Limited in a bulletin made available to our correspondent on Monday said, “Using trend analysis, we estimate the national headline inflation will rise slightly by 0.3 per cent to 11.6 per cent in October, from 11.3 per cent in September.

This is as a result of the rise in the consumer price index which we estimate to rise by 0.76 per cent to 139.1 points in October from 138.01 points in September.

“In our view, the increase will be as a result of limited food supply to meet demand as well as a slow output in the agricultural sector. In addition, the global increase in food prices will contribute to the rate of inflation in coming months.”

The FDC’s urban inflation index showed that prices of goods and services rose by 2.27 per cent to 13.84 per cent in October, from 11.57 per cent in September.

This months’ surge in prices, according to the bulletin, is mainly attributable to cost push factors and disruption from flooding.

It said, “21 states were primary victims or indirectly affected by the October floods in Nigeria. Storage of crops and food items has been a major problem in Nigeria. Thus, when the floods happened, the food stuff inventory across most states was mostly destroyed. In our survey, we found that the food basket rose by 2.84 per cent to 15.53 per cent from 12.69 per cent in September. The products affected include- vegetables, pepper, cassava, beans and rice and contributing to a higher index.”

It added that the non-food basket rose marginally by 0.05 per cent to 9.84 per cent within the month, saying, “Prices of most items in the non-food basket were unchanged except for sand, kerosene, air transport and accommodation, which increased in October. These exceptions occurred partially as a result of the scarcity of petroleum products.”

The analysts pointed out that it was not expected that the Monetary Policy Committee would change the benchmark interest rate at its next meeting in November.

They, however, said the possibility of easing rates in early 2013 was high if inflation remained moderated.

On exchange rate, the bulletin stated, “We expect the naira to trade horizontally as traders square their position ahead of the MPC meeting in a week’s time. The appreciation of the naira will also help in moderating inflationary pressures by bringing down the naira cost of imports, especially of commodities. This moderation however, is transient, as the naira will find its true value based on the relative inflation rates between the United States and Nigeria.”

Source: Punch