By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE)-Nigeria’s Consumer Price Index (CPI) which measures inflation rate rose by 8.5 percent year-on-year (y/y) in March 2015 marginally higher from the 8.4 percent rate recorded in February, according to the latest CPI and inflation report from the National Bureau of Statistics (NBS).
“This is the fourth consecutive month of a faster increase in the Headline index to reach the highest inflation rate recorded for the year. The Headline rate for March also equals last year’s high recorded in August,” the report said.
According to NBS, while the pace of increase in food prices held firm for the second consecutive month, the faster increase in the Headline index was driven by increases in the non-food Classification of Individual Consumption by Purpose (COICOP) divisions which also reflected in the Core sub-index.
The report disclosed that food prices as observed by the Food Sub-index increased at relatively the same pace in March as in February; by 9.4 percent. “The pace of increases was weighted upon by a slower increase in the Bread and Cereals, Oils and Fats, Dairy and Confectionarygroups. Faster increases were observed in all other groups which contribute to the Food sub-index,” NBS added.
NBS affirmed that on a month-on-month basis however, food prices increased at a higher rate of 1.0 percent, 30 basis points (bps) higher than the 0.7 percent increase recorded in February.
In its analysis, Cordros says this incidentally is the same rate of month-on-month (m/m) increase recorded in March last year. “The month-month increase was traced to higher prices in all groups that make up the index, with the highest price alteration recorded in the Fruit, Fish, Potatoes, Yam & Other Tubers, and Vegetables groups. Notably, after reaching a two-year peak of 8.85 percent last month, the rate of increase in Imported Food Inflation moderated to 7.3 percent y/y under the review period,” Cordros said.
The report further affirmed that the continued uptrend in the Headline inflation year-to-date mirrors their conservative float range of 9.5 percent and 10 percent for the 2015 fiscal year. “Following the just concluded general elections (which has reduced elevated political spending) and the CBN’s continued restrictive liquidity stance, we believe the biggest downside risk to inflation going forward is the pass-through consequence of a weaker Naira,” Cordros report noted.
The report says this includes higher prices on food and non-food items and services. Again, the set of austerity measures announced by the Federal Government – such as VAT increase, increase in import duties, and surcharges on airline tickets e.t.c – upon implementation in the second quarter as proposed (although subject to the consent of the new government), is also expected to feed through the inflation figure.
“In addition, inflation might get heated by any action of the incoming government to pursue reforms that are expansionary in nature. We also note the inflationary consequence of a final removal of subsidy on petroleum, taking guidance from the recent press release by the new president-elect, through a representative,” the report added.
