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Base effect drives further drop in inflation despite rise in prices — FSDH

By Elizabeth Adegbesan

FSDH Research has projected the inflation rate of May to drop to 11.5 percent year-on-year (YoY) from 12.48 percent recorded in April.

According to the Research, the expected drop in inflation was as a result of the base effect in the Composite Consumer Price Index (CCPI) from 2017.

FSDH, disclosing this in its monthly Inflation Watch report, noted that the prices of most food items in May increased resulting to a rise in Food and Non-Alcoholic Index.

The report stated: “FSDH Research expects the inflation rate (YoY) to drop to 11.50 percent in May 2018 from 12.48 percent recorded in April. The drop in the inflation rate is expected as a result of the base effect in the CCPI from the previous year.

“Our analysis indicates that the value of the Naira depreciated at both the Nigerian Autonomous Foreign Exchange (NAFEX) and parallel markets in May 2018.  The rise in the international prices of food coupled with the depreciation in the value of the Naira led to an increase in the prices of imported consumer goods in Nigeria between the two months under review.

“FSDH Research notes that there is a potential increase in the local prices of imported food items because of the faster than expected increase in the international food prices.

“The prices of most of the food items that FSDH Research monitored in May 2018 increased substantially, leading to a 1.20 percent increase in our Food and Non-Alcoholic Index. This Index increased YoY by 13.29 percent, up from 240.30 points recorded in May 2017.

“We also observed an increase in the prices of Transport and Housing, Water, Electricity, Gas & Other Fuels divisions between April and May 2018. We estimate that the increase in the CCPI in May would produce an inflation rate of 11.50 percent, lower than the 12.48 percent recorded in April,” said FSDH.


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