FSDH Re­search fore­casts 11.69% in­fla­tion for De­cem­ber


Ahead of the re­lease of in­fla­tion fig­ures on Thurs­day by the Na­tional Bureau of Sta­tis­tics, the FSDH Re­search, an arm of the FSDH Mer­chant Bank Lim­ited, is ex­pect­ing in­fla­tion rate to rise to 11.69 per­cent in De­cem­ber 2018 from 11.28 per­cent recorded in Novem­ber.

This rep­re­sents a monthly in­crease of 0.41 per­cent be­tween the two months and the high­est monthly in­crease since Novem­ber 2016. The ex­pected in­crease in the in­fla­tion rate will re­flect higher price in­creases within the food and non-al­co­holic bev­er­ages divi­sion and other non-food items due to end-of-year and fes­tiv­ity pur­chases.

An anal­y­sis by FSDH Re­search in­di­cated that the value of the Naira de­pre­ci­ated at the Nige­rian Au­ton­o­mous For­eign Ex­change (NAFEX) mar­ket in De­cem­ber 2018, while it ap­pre­ci­ated at the par­al­lel mar­ket. The value of the Naira de­pre­ci­ated marginally by 0.01 per­cent at the NAFEX mar­ket to close at US$/N364.18 from US$/N364.16 in Novem­ber, while it gained 0.14 per­cent in the par­al­lel mar­ket to close at US$/N365.00 from US$/ N365.50 in Novem­ber 2018.

The value of the Naira ap­pre­ci­ated at the par­al­lel mar­ket as a re­sult of newly in­tro­duced spe­cial ‘Thurs­day sale’ to Bureau de Change (BDCS) op­er­a­tors. The de­pre­ci­a­tion recorded at NAFEX be­tween the two months un­der re­view in­creased the im­pact of for­eign ex­change on the prices of im­ported con­sumer goods in the do­mes­tic mar­ket.

The prices of food items as mon­i­tored by the firm in De­cem­ber 2018 moved in vary­ing di­rec­tions, lead­ing to 1.00 per­cent in­crease in its food and non-al­co­holic in­dex. The In­dex in­creased year-on-year by 13.83 per­cent to 295.66 points, up from 259.75 points recorded in De­cem­ber 2017.

Also FSDH Re­search ob­served an in­crease in the prices of trans­port and hous­ing, wa­ter, elec­tric­ity, gas and other Fu­els di­vi­sions be­tween Novem­ber and De­cem­ber 2018.

“We es­ti­mate that the in­crease in the Com­pos­ite Con­sumer Price In­dex (CCPI) in De­cem­ber would pro­duce an in­fla­tion rate of 11.69 per­cent”, the an­a­lysts said.

De­spite the ex­pected in­crease in the in­fla­tion rate in De­cem­ber 2018 and in 2019, FSDH Re­search be­lieves the mem­bers of the MPC of the Cen­tral Bank of Nige­ria will vote to hold rates at the cur­rent lev­els in Jan­uary 2019. The most ap­pro­pri­ate in­stru­ment to sig­nal tight­en­ing at the mo­ment in the face of frag­ile credit and eco­nomic growth is to use open mar­ket op­er­a­tions (OMO) to mop up ex­cess liq­uid­ity.

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