By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-Nigeria’s Inflation Rate is expected to drop to a single digit figure of 9.24 percent (9.24%) in year 2013.

This is contained in a Presentation Friday titled “Monetary Policy and Economic Growth 2012 Outcomes and Prospects in 2013” by Bismarck Rewane Managing Director (MD), Financial Derivatives Company Limited
(FDC) at 2^nd Finance Correspondents Association of Nigeria (FICAN) Roundtable on the Economy with the theme “Nigerian Economy in 2012: The Issues and Expectations”.

Rewane in his Presentation said, single digit inflation is expected as food prices would trend downwards due to improved agricultural output.

Apart from these, he said prices may occasionally spike due to unexpected events such as subsidy removal and low agricultural output, Security threats during harvest seasons may influence prices negatively.

Rewane affirmed that core inflation is expected to moderate relatively below food inflation and Drivers of core inflation are unlikely to rise significantly.

He explained that given the expected decline in inflation for December and a single digit outlook for 2013, there will be an opportunity for the Monetary Policy Committee (MPC) to consider moving to a more accommodative monetary stance in late January.

“In other words, the CBN could begin a slow and modest reduction in interest rates, e.g. reduction of the MPR by 25bps to 11.75%p.a. However, if the budget impasse between the President and the National Assembly over the increased benchmark of $79pb is not resolved, the CBN may have no alternative but to retain its current MPR at 12%p.a” he said.

Rewane highlighting on the Gross Domestic Product (GDP), said rebasing is expected to take place this year. “This would alter the base year to 2008 from 1990. It will also add N400 billion to the GDP” he said.

According to him, the GDP is currently estimated at $273.8 billion, “by carrying out the exercise, Nigeria will be emulating Malaysia and South Africa which rebased their GDPs from 2000 to 2005 each and Ghana- from 1993 to 2006.

“Rebasing the GDP would make the rich richer and poor poorer while the country’s growth trajectory will decline” he said.

Rewane further affirmed that Real GDP is one that is adjusted for inflation while nominal GDP is the value of goods and services based on current Market prices.

He said that Nigeria’s real GDP growth could decline from 7.0% to 5.0% in year 2013 and fiscal deficit as a percentage of GDP is usually at a threshold of 3.0%. “Applying this principle, maximum deficit for 2013 would have been N1.3 trillion while the rebasing will allow for a deficit of N900 billion or 1.5%” he said.

“Notwithstanding, Nigeria, will still be able to meet the convergence criteria for ECOWAS even as the level of inequality in an economy is magnified” Rewane said.

The FDC CEO said that declining interest rate environment expected in 2013 even as interest rate will continue to be Market driven. “Interest rates to be influenced by the Central Bank of Nigeria’s adjustments of the Monetary Policy Rate (MPR) which is likely to be reduced from current level of 12% Per Annum. But complete removal of fuel subsidy will stall interest rate reduction due to inflationary threats,” he said.

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