Nigeria’s February inflation edges up

The rise could be attributed to increases in farm produce prices due to limited supplies.

Nigeria’s February Consumer Price Index, CPI, which measures inflation, rose by 9.5 per cent year-on-year, compared to 9.0 per cent in January, the Nigeria Bureau of Statistics, NBS, has said.

The rise in the headline index, relative to January, could be attributed to increases in farm produce prices due to limited supplies as the toll of inventory (accumulated during the previous harvest period) drawdowns may begin to take effect, the bureau said in a document analysing the nations February inflation indices.

However, various classes of the core index witnessed increases. The composite CPI increased by 0.75 per cent month-on-month from index levels recorded in January. The Urban composite CPI was recorded at 142.0 in February, which was a 9.8 per cent year-on-year change. This was higher than the 9.2 per cent recorded in January. The corresponding rural composite CPI recorded a 9.5 per cent year-on-year change, up from 9.1 per cent in January.

The percentage change in the average Composite CPI for the twelve-month period ending in February 2012 over the average of the CPI for the previous twelve-month period was recorded at 11.7 per cent. The corresponding 12-month year-on-year average percentage change for the urban index was 13.7 per cent, while the corresponding rural index stood at 10.3 per cent, according to the NBS.

In February, the composite Food Index increased year-on-year by 11.0 per cent to 143.3 points. This was 0.9 percentage points higher than the 10.1 per cent recorded in January.

On a month-on-month basis, the Food index increased by 0.7 per cent from January to February. Higher prices were observed across all classes in the food sub-index, with the fastest rising prices observed in the vegetables and fish classes. However, the largest determinants of the increase in the food index were bread and cereals, meat, fish, and poultry and dairy products (milk, cheese and eggs).

The “All items less Farm Produce” or Core index, which excludes the prices of volatile agricultural products, increased by 11.2 per cent year-on-year. This was slightly lower than 11.3 per cent recorded in January. On month-on-month basis, the Core index was roughly unchanged from levels recorded in January1. Year-on-year, the largest contributors to the increase in the core index were rental prices, as well as prices of motor cars, books, and liquid fuel (kerosene).

Yvonne Mhango, Sub-Saharan Africa Economist, Renaissance Capital, an investment bank, said this higher inflation coupled with some naira weakness implies no rate cut tomorrow by the Monetary Policy Committee (MPC).

“The increase in inflation to 9.5 per cent Year on Year (YoY) in February, from 9.0 per cent YoY in January, was due to food prices. Food inflation increased to 11.0 per cent YoY in February, from 10.1 per cent YoY in January, by our estimates (our inflation estimates for the CPI sub-categories are not adjusted by population across 37 states, because these weights have not been made available), partly due to higher imported food inflation, which we believe increased on the back of a moderately weaker naira,” she said.

“Core inflation (which excludes farm produce, according to the NBS) edged down to 11.2 per cent YoY in February, from 11.4 per cent YoY in January, on our estimates. However, the biggest non-food sub-categories (housing and utilities, clothing and footwear, transport) show a pickup in inflation, when their inflation measures are not adjusted by state population. We think this implies that non-food, especially energy, price pressures persist.

“We still project a moderate pick up of inflation into the 10-11 per cent region, particularly in the second half of 2013. Given February’s uptick in inflation, our inflation outlook, and that the naira has recently come under weakening pressure due to strong Foreign Exchange demand (N159.5/$1 on 14 March versus N156.15/$1 at Year End 2012), we expect the MPC to keep the monetary policy rate (MPR) unchanged at 12 per cent at tomorrow’s MPC meeting,” she added.

Last month, the NBS reported that the January inflation rate reached a record low of 9 per cent, from the 12 per cent recorded in December 2012. The significant 3 per cent fall in the rate of inflation was attributed to high base effects which implies that the impact of any price increase in January 2013 was felt less as a result of a high commodity price in January 2012.

Bismarck Rewane, a Financial Analyst and Managing Director, Financial Derivative Company, FDC, said, “The Monetary Policy Committee will meet on March 18th to determine what monetary policy action to employ in a benign inflation environment. The Central Bank has its work cut out for it in aligning its mandate for price stability and the public outcry for a cut in interest rates. The clarion call is for the Central Bank to adopt an accommodative stance”.

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