FSDH Research has said it expects the inflation rate to further drop marginally from the 11.25 recorded in March to 11.23 for April, 2019, due to the fact that the Consumer Price Index (CPI) increased more slowly in April, 2019, than it increased in the corresponding period of 2018.
FSDH Head of Research, Ayodele Akinwunmi, made the disclosure at the monthly briefing of FSDH with finance journalist over the weekend.
The bad news, however, is that the month-on-month increase in April, 2019, was the fastest increase recorded since October, 2018.
Given consistent drop in inflation rate since January, 2019, it leaves room for experts to predetermine whether the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will drop the Monetary Policy Rate (MPR) further when it meets on May 21-22, 2019.
Throughout the last two years, inflation rate peaked at 18.72 per cent in January, 2017. The harsh macro-economic environment, which put pressure on the value of the naira, was responsible for the hike. However, the Nigerian economy has recorded relative improvements in the last few months.
The increase in the price of crude oil above $70/b, relative accretion to the external reserves above $44bn, stability in the value of the currency, successful conduct of general elections, and effort to improve infrastructure in the country are responsible for the improvement in the economy. FSDH Research, however, notes that this growth is fragile and highly susceptible to developments in the international market. The price monitor that FSDH Research conducted on food and non-food items shows that prices moved in an upward direction in April, 2019, compared with March, 2019.
Akinwunmi said, “A cursory look at prices of food items in the international market also suggests that prices of most items increased in April compared with March. On the other hand, the value of the naira appreciated marginally against the dollar in April.
“This marginal appreciation in the value of naira in April, coupled with the increase in the prices of food items in the international market, might have reduced some of the pressure on the prices of consumer items in Nigeria.”
The value of the naira at end of April was N360.40/$ compared with end-March at N360.47/$ indicates that the value of the naira strengthened by N0.07.
He said although the declining inflation rate was still higher than the six to nine per cent target of the CBN, it had supported the low yields currently available in the fixed income market.