Photo: IITA/Flickr

A market in Nigeria showing traders selling red pepper, oil palm, "parboiled cow skin", cow meat, clothing materials,

Ahead of scheduled announcement of inflation figure by the National Bureau for Statistics (NBS), analysts see a possible drop in inflation rate to the much desired single digit bracket for the month of January.

Analysts at FSDH Research in a report made available to Leadership said an analysis of the consumer good prices monitored across the country in January showed a general decline in prices across the major components of the food basket and household materials.

FSDH said average price of rice decreased by about nine per cent, the price of onions decreased by about 49 per cent, tomatoes fell by about 37 per cent and the price of potatoes (Irish) decreased by about 12 per cent.

It appears only the prices of garri increased by about 26 per cent and palm oil also rose by about 25 per cent. But price of tuber dropped marginally in January.

The drop in the prices of vegetables was linked to the seasonality effect of harvest.

Based on the drop in the prices of the food basket, the report said, "FSDH Research is of the opinion that inflation rate (year-on-year) in the month of January 2013 should fall to single digit due to base effect.

"Our estimate indicates an increase of 0.61 per cent in the Composite Consumer Price Index (CCPI) to 142.0 points in January, which will produce an inflation rate of 9.1 per cent, 290 basis points lower than 12.0 per cent recorded in the month of December. To record an inflation rate of 10 per cent in January, the CCPI must increase by at least 149 basis points month-on-month, which in our opinion is unlikely".

Also, the Food and Agriculture Organisation (FAO) Food Price Index (FFPI) for the month of January 2012 released on February 07, 2013 showed that the Index averaged 210 points in January, unchanged from the slightly revised December value. The FAO Food Price Index measures the monthly change in international prices of a basket of food commodities.

According to the FAO, the Index stabilised in January. However, there was a rebound in oils/fat prices, mainly driven by palm oil on account of fresh import demand and concerns about abundant rain disrupting of harvest in South-East Asia which offsets a decline of cereal and sugar prices in the FFPI.

Meanwhile, mostly on account of improved crop production, international prices of cereal reflect a slide in grain quotation as price of rice remained stable. The prices of sugar declined for the third consecutive month, driven by expectations of a large global production surplus and robust export availabilities in the 2012/2013 marketing season. International meat prices on the other hand remained stable, although a slight weakening in prices are evident.

Further analysis of the foreign exchange rate showed that the value of the naira appreciated marginally against the dollar in the month of January 2013 by 0.02 per cent compared with the depreciation of 0.01 per cent in the month of December.

"Consequently, the appreciation in the value of the naira in January 2013 lowered the impact of the prices of imported consumer goods in Nigeria between the two months under review," said FSDH Research.