By Emeka Anaeto, Economy Editor

Ahead of next week’s scheduled release of April 2016 inflation reading, economists at FSDH Merchant Bank have predicted a continued spike in the headline index. According to them the April 2016 inflation rate (year-on-year) is expected to increase to 13.7 per cent from 12.77 per cent recorded in the month of March 2016.

Kemi Adeosun

“We expect the increase in the inflation rate to come from increase in food and transportation cost”, they stated in their latest inflation research report. The National Bureau of Statistics, NBS, would release the inflation rate for the month of April 2016 on May 18, 2016. FSDH alluded to the Food Price Index, FPI, that the Food and Agriculture Organization, FAO, released last week which shows the FPI continuing   its upward trend for the third consecutive month.

The Index increased by 0.7 per cent in April from March level on account of increase in vegetable oil prices coupled with a modest gain in the prices of cereals. The increases in both vegetable oil and cereals were more than enough to offset the decline in dairy and sugar prices.

The FAO Vegetable Oil Price Index was up by 4.1 per cent from March. The increase in the Index was primarily driven by palm and soy oil prices, as weak production outlook and growing world demand trails production. The FAO Cereal Price Index was up by 1.5 per cent, driven by the weaker U.S Dollar. The prices of maize quotation largely impacted on the Index.

Wheat and rice prices on the other hand dropped marginally. The FAO Meat Price Index was up by 0.8 per cent, the notable increase was recorded in bovine meat prices while prices of pig and poultry remained steady. On the flip side, the FAO Dairy Price Index was down 2.2 per cent due to a build-up of stocks in the major exporting countries.

Also the FAO Sugar Price Index fell by 1.7 per cent in April 2016 reflecting large export availabilities in Brazil, supported by expectations of a drop in demand. According to FSDH “our analysis indicates that the value of the Naira remained stable at the inter-bank market while it appreciated at the parallel market by 0.41 per cent to close at US$/N320.70 from US$/N322.00 at the end of March.

“The appreciation recorded at the parallel market between the two months under review moderated the impact of the increase in the imported consumer good prices in the domestic market”. The report also stated that the prices of most of the food items that FSDH Research monitored in April 2016 increased. “The prices of tomatoes, garri, onions, sweet potatoes, Irish potatoes, meat, yam, rice, fish, vegetable oil and palm oil increased by 337.5%, 16.67%, 12.5%, 10%, 10%, 10%, 8.33%, 7.69%, 3.13%, 2.63% and 2.22% respectively”, according to the report.

“The movement in the prices of food items during the month resulted in 2.0per cent increase in our Food and Non-Alcoholic Index to 198.07 points. “ We also noticed increases in Transport, Housing, Water, Electricity, Gas & Other Fuels divisions between March and April 2016.

“Our model indicates that the price movements in the consumer goods and services in April 2016 would increase the composite consumer price index (CCPI) to 192.95 points, representing a month-on-month increase of 1.59 per cent. “We estimate that the increase in the CCPI in April will produce an inflation rate of 13.7 per cent”. FSDH concluded.