Nigeria: Increase in Fuel, Food Prices Weakens Inflation Recovery Pace

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(file photo).
22 November 2018

Although the consumer price index, (CPI), which measures inflation decreased by 11.26 per cent (year-on-year) in October, 0.02 per cent points lower than the rate recorded in September (11.28 per cent), rise in fuel prices--diesel and kerosene as well as food items continued to weaken the pace of recovery.

Indeed, increases were recorded in all COICOP divisions that yielded the Headline index, based on the latest data from the National Bureau of Statistics (NBS) yesterday.

On month-on-month basis, the Headline index increased by 0.74 per cent in October, down by 0.09 per cent points from the rate recorded in September (0.83) per cent.

Also, the composite food index rose by 13.28 percent in October compared to 13.31 per cent in September. This rise in the food index was caused by increases in prices of fruits, meat, vegetables, potatoes, yam and other tubers, bread and cereals, and oils and fats.

The core sub-index increased by 0.80 per cent in October compared with 0.64 per cent recorded in September, on month-on-month basis.

The highest increases were recorded in prices of fuel and lubricants, vehicle spare parts, domestic and household services, carpets and other floor coverings, dental services, hospital services, repair of household appliances, and medical services.The average 12-month annual rate of change of the index was 10.90 per cent for the period ending October, from 11.09 per cent recorded in September.

On month-on-month basis, the food sub-index increased by 0.82 per cent in October, from 1.00 per cent recorded in September.The percentage change in the average composite CPI for the 12 months ending October 2018 over the average of the CPI for the previous 12 months period was 12.78 per cent, from 13.16 per cent recorded in September.

The urban inflation rate increased by 11.64 per cent (year-on-year) in October from 11.70 per cent recorded a month earlier, while the rural inflation rate increased by 10.93 per cent in October from 10.92 per cent in September.On a month-on-month basis, the urban index rose by 0.76 per cent in October 2018, from 0.86 per cent recorded in September, while the rural index also rose by 0.72 per cent in October, down from the rate recorded in September (0.82) per cent.

The average annual rate of change of the Food sub-index for the 12-month period ending October, over the previous 12-month average was 15.36 per cent, from the average annual rate of change recorded in September (15.92) per cent.

For Research Analyst at Cyprus-based FXTM, Lukman Otunuga, there was a sense of relief felt across the Nigerian economy, following reports of the nation's inflation cooling to 11.26 per cent in October, after rising for two straight months."Although the CPI report is somewhat encouraging, markets need to see further signs of inflationary pressures easing."There will be a strong focus on November and December figures, which most likely will shape monetary policy expectations for the first quarter of 2019.

"Away from inflation figures, the steep decline in oil prices could be a threat to Nigeria's economic recovery. If oil prices remain depressed and government revenues end up taking a hit, the impacts are likely to be reflected on the currency and inflation," he said.

The "All items less farm produce" or Core inflation, which excludes the prices of volatile agricultural produce stood at 9.9 per cent in October, up by 0.1 per cent from the rate recorded in September 2018 (9.8) per cent.

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