By BABAJIDE KOMOLAFE

The rate of increase in prices of goods and services will rise to 10 percent from the 7.7 percent recorded in February.

The Central Bank of Nigeria head office in Abuja.

The rate, which is referred to as inflation rate has been relatively stable since October last year. From 7.8 percent in October, it rose marginally to 7.9 percent in November and 8.0 percent in December. Though it remained stable at 8.0 percent in January, it however fell to 7.7 percent in February.

A Central Bank of Nigeria (CBN) official however estimated that this decline will be short-lived and replaced by a steady rise in the next six months.  Deputy Governor, Operations, CBN, Mr Kingsley Moghalu disclosed this in his personal statement at the Monetary Policy Committee (MPC) meeting held last month.

He said, “While headline inflation in February 2014 fell to 7.7 percent from 8.0  percent in January 2014, core inflation has inched higher from 6.65 percent in January 2014 to 7.17 percent in February 2014.

Moreover, staff estimates project headline inflation at a range between 8 percent and 10 percent over the next six months, based on factors including fiscal spending and the impact of the planting season.

This projection clearly indicates that an inflationary threat remains real, and the beast of inflation is yet to be slain decisively.

The policy implication is that the MPC must maintain a tight monetary policy at this time.  This is more so when we consider the global conditions noted earlier.”   Meanwhile analysts at Financial Derivatives Company (FDC), have predicted decline in inflation for the Month of March to 7.64 percent.

The prediction was contained in the FDC’s Economic Bulletin published last week. The company stated, “Based on our monthly analysis of the national consumer price index, we forecast a moderate decline in the headline inflation to 7.64 percent in March from 7.7 percent recorded in February.

Our projection reveals a slower rate of change in consumer prices when compared to the same period in 2013.”

“Further to this, the continuous contractionary monetary policy by the CBN is expected to keep inflation muted in the near team. Also, the projection of a lower inflation rate coincides with the announced rebased GDP numbers.

Most countries look towards achieving a high GDP growth rate in a low inflation environment. A high nominal GDP in a low inflation environment increases the fiscal and monetary policy options open to policy makers.

As an attractive market, the increase in capital flows will boost the external reserves level and enable the CBN bring down interest rates later.”