Financial analysts have predicted a decline in the inflation rate for the month of May to 8.9 per cent, from 9.1 per cent recorded in April.

FSDH Merchant Limited, in a report titled: ‘Inflation Watch’ made available to our correspondent on Thursday, said, “Our model indicates that the price movements in the consumer goods in May will increase the Consumer Price Index to 145.67 points, representing a month-on-month increase of 0.59 per cent. The increase in the CPI in May will produce an inflation rate (year-on-year) of 8.9 per cent, representing 20 basis points decrease from April 2013 inflation rate.”

The analysts said that the forecast pointed to a further drop in inflation rate in June below 8.9 per cent.

The report added, “An analysis of the prices of a basket of consumer goods that FSDH Research monitored across the country in May shows that prices of major components of the basket increased over April levels. The average prices of rice increased by about 3.95 per cent on account of continued pressure from the increase in import duty.”

It said the impact of the declining inventories and the planting season for some food items led to increase in the average prices of yam, potatoes, tomatoes and onions by 55 per cent, 13.91 per cent, 27.69 per cent and five per cent, respectively between April and May 2013.

The report said, “The impact of the drop in global inventories led to 60 per cent increase in the price of palm oil. Other food items that recorded increases were fish, up by 3.70 per cent and beans, up by 2.78 per cent. However, there were declines in the prices of meat and vegetable oil, which decreased by 7.58 per cent and 5.74 per cent, respectively.”

It noted that the observed increase in the prices of food items in May resulted in 0.80 per cent rise in the Food and Non-Alcoholic Index.

“We also noticed increases in the prices of recreation and culture, clothing and foot wears, health, transportation and restaurants and hotels between April and May,” it added.

The report said the appreciation in the value of naira in May 2013 resulted in a marginal decline and stability in most of the prices of some imported consumer goods in Nigeria between the two months under review and moderated the impact of imported inflation on the Nigerian economy.

“Our analysis of the foreign exchange rate indicates that value of the naira appreciated marginally by 0.01 per cent against the United State dollar in the month of May 2013, compared with April,” it added.

Source: Punch (by Ademola Alawiye)