January 17, 2023

Inflation softens but food index rises further


It puts CBN in policy dilemma — Analysts

By Elizabeth Adegbesan

The National Bureau of Statistics, NBS, said that headline inflation rate softened year-on-year (YoY) by 13 basis points to 21.34 percent in December from 21.47 percent in November 2022.

In its Consumer Price Index (CPI), report for December 2022 the NBS stated: “In December 2022, the headline inflation rate eased to 21.34 percent compared to November 2022 headline inflation rate which was 21.47 percent.

“On a month-on-month (MoM) basis, the percentage change in the All Items Index in December 2022 was 1.71 percent, which was 0.32 percent higher than the rate recorded in November 2022 (1.39 per cent). This means that in the month of December 2022, the general price level was 0.32 percent higher relative to November 2022”.

On food inflation, NBS said: “The food inflation rate in December 2022 was 23.75 percent on a YoY basis; which was 6.38 percent higher compared to the rate recorded in December 2021 (17.37 percent).

“The rise in the food inflation was caused by increases in prices of bread and cereals, oil and fat, Potatoes, yam and other tubers, fish, food products e.t.c.

“On a month-on-month basis, the food inflation rate in December was 1.89 percent, this was 0.49 percent higher compared to the rate recorded in November 2022 (1.4 percent ). This increase was attributed to increase in prices of some food items like Oil and fat, Fish, Potatoes & Tubers, Bread & Cereals, and Fruits etc.

However, analysts in the financial sector have projected that a moderate uptick in December inflation rate will skew the Central Bank of Nigeria’s Monetary Policy Committee’s voting pattern in its January meeting.

In their projections for this week, analysts at Cowry Asset Management Plc said: “Notwithstanding efforts by the monetary authority to fight spiralling inflation that has stayed unabated so far, at the next meeting next week, the apex bank is faced with the dilemma of tightening or holding rates to monitor inflationary movement as it decides on several economic indicators that will help spur growth and recovery.

“We believe that a moderate uptick in the headline numbers will skew the voting pattern of the committee members in favour of maintaining a tightening stance by between 50 basis points and 75 basis points”.

On his part, the President, Association of Capital Market Academics of Nigeria, ACMAN, Prof Uche Uwaleke said: “Although headline inflation came in lower in December compared to November on year-on-year basis, the usual demand pressure associated with the festive season was evident when viewed on month-on-month basis.

“It’s equally not surprising to note that core inflation increased in December 2022 relative to the previous month which may be due in part  to the pass-through of higher exchange rates on imported items such as clothing, furniture, and other commodities usually in high demand during the Christmas period”.