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Minimum wage, others to trigger rise in inflation rate — Analysts

As inflation rate softens to 11.25% in March

By Elizabeth Adegbesan

Analysts in the financial sector have projected that the signing of the new minimum wage bill, a hike in energy tariffs and ongoing planting season would trigger a rise in monthly inflation rate in April, May and June this year even as inflation rate for March 2019 slowed down to 11.25 percent.

National Bureau of Statistics (NBS), yesterday,   in its Consumer Price Index (CPI) report for March disclosed that the CPI which measures inflation dipped by 0.06 percent to 11.25 percent year-on-year (YoY) in March 2019 from 11.31 percent in February.

The NBS report stated: “The CPI which measures inflation increased by 11.25 percent (YoY) in March 2019. This is 0.06 percent points lower than the rate recorded in February 2019 (11.31 percent). Increases were recorded in all Classification of Individual Consumption by Purpose (COICOP) divisions that yielded the headline index. On MoM basis, the headline index increased by 0.79 percent in March 2019, this is 0.06 percent rate higher than the rate recorded in February 2019 (0.73 percent).”

inflation

On food prices, NBS stated: “The composite food index rose by 13.45 percent in March 2019 compared to 13.47 percent in February 2019. This rise in the food index was caused by increases in prices of bread and cereals, meat, fish, potatoes, yam and other tubers, oils and fats, and soft drinks, vegetables, and fruits.

“On MoM basis, the food sub-index increased by 0.88 percent in March 2019, up by 0.06 percent points from 0.82 percent recorded in February 2019.”

States with the highest food inflation YoY were Kebbi (16.35 percent), Niger (16.22 percent) and Kwara (15.95 percent), while Bauchi (11.82 percent), Delta (11.70 percent) and Ogun (11.55 percent) recorded the slowest rise.

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On MoM basis however, food inflation was highest in Kogi (2.97 percent), Lagos and Plateau (2.11 percent) and Oyo (2.04 percent), while Imo and Nasarawa (0.12 percent), Enugu (0.11 percent) recorded the slowest rise with Bayelsa recording food price deflation

Commenting on the development, Analysts at United Capital Research Management Plc   said: “Looking ahead, we expect inflation to remain sticky in the 11.0 percent region, barring the materialization of any major trigger – minimum wage implementation and/or a hike in energy tariffs among others. “Furthermore, although the recent cut in the Monetary Policy Rate (MPR) should, in ordinary economic theory, awaken some inflationary pressure, the Central Bank of Nigeria’s (CBN’s) continued open market operations (OMO) mop ups and foreign exchange interventions should keep liquidity largely constrained. More so, our expectation of continued FX stability should help keep core inflation in check.

“Additionally, while there seem to be recent speculations around a PMS price hike, the federal government’s clarification of staving-off a reduction in subsidy in the near term provides an anchorage for the core inflation sub-index.

“For the food inflation sub-index, in the absence of any crisis that could deter the planting season, we should see mild MoM pressure on the index. Overall, we see a marginal uptick in MoM headline inflation to 0.80 percent (from 0.79 percent in March 2019) which translates to an 11.22 percent forecast for April 2019, a decline of 4 basis points from the March 2019 outcome.”

On the other hand, analysts at Cowry Assets Management said: “We expect inflation rate to rise in the months of April, May and June amid Easter and Ramadan festivities plus ongoing planting season. Also, the eventual signing of the new minimum wage bill will also push headline inflation higher going forward”.


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