Aug 9,2017 @ 3: 37 PM
The Financial Derivatives Company has predicted that year-on-year headline inflation will increase by 0.16 per cent, from the 16.10 per cent it was in June, to 16.26 per cent in July, leading to a reversal of a positive trend of the last five months.
According to the Lagos-based research and financial advisory firm, the influence of base year effects on headline inflation has weakened immensely.
“In our estimates, month-on-month inflation is expected to taper significantly to 1.37 per cent (17.74% annualised) from 1.6 per cent (20.98% annualized) in June. This reduction in the monthly inflation is a manifestation of further exchange rate appreciation as the naira has been relatively stable in the forex market.
“The Purchasing Managers’ Index (PMI), a proxy for manufacturing activity, improved further to 54.1 in July, signaling an expansion in manufacturing activities though supply-side constraints persist. Manufacturers are building up inventory levels on the perceived idea that the economy is improving. Unfortunately this is occurring in an environment with naira illiquidity, large carrying costs and dwindling disposable income. The rains and flood in July disrupted movement and reduced traffic to supermarkets. Power supply dropped below 3000mW/hr in July,” FDC stated.
They noted the general moderation in food prices even though there were a few outliers such as beans and rice. Furthermore, they opined that the decline in power supply from the grid during the period resulted in higher electricity costs, while the price of diesel, which is generally used to power generators and trucks increased by 6.25 per cent to N170 per litre.