‘Single digit inflation target now uncertain’

FSDH research faults claims on banks’ lending

NIGERIA may lose out on its targeted single digit inflation level this year, which would have checked the streak of weak purchasing power and put the country on a sustainable path of interest rate cut.

A two-fold pursuit of exchange rate stability and reduction in inflation level has put the country’s monetary authority on alert, as it has held interest rate at 14 per cent for more than two years, despite clamour for rate cuts to boost growth.

But FSDH Research has noted with concern the prevailing crisis in the food producing states in Nigeria, which has sustained upward pressure on food prices, as harvests begin.

Besides, a sense of uncertainty ahead of the 2019 elections, coupled with the possibility of pre-election spending, stimulating demand-pull inflation could complicate matters the projection.

The Head of Research at FSDH Merchant Bank Limited, Ayodele Akinwunmi, at the bank’s briefing on the monthly Economic and Financial Market Outlook, said that while expecting that inflation rate (year-on-year) would drop to 11.01 per cent in July 2018, from 11.23 per cent in June, the expected decrease in the inflation rate will be largely attributable to the base effect of the previous year.

According to him, the fact that food index is one of the three major drivers of inflation in the country and facing crisisinduced pressure in food producing states, it is a major risk to the achievement of a single digit inflation rate in 2018.

“The movement in the prices of food items increased our Food and Non-alcoholic Index by 1.18