Food prices rise, but experts predict further decrease in inflation

Despite the moderation in Year-on-year (Y-o-Y) inflation between February and March, Tribune Online investigations have revealed that there are sharp rising food prices in most Nigerian markets especially Lagos, which is attributable to seasonality.

The National Bureau of Statistics is scheduled to release inflation data for April this week, just as a herd of economic and financial experts are predicting further decrease in headline inflation.

With the seasonality factor still in effect, experts at Afrinvest West Africa Limited believe that the farm produce will remain pressured as the impact of the planting season – which lasts from Mid-February to End of August – continues to weigh on Food prices.

However, they are hopeful that inflation will come down due to an increased supply of foreign exchange (FX) by the Central Bank of Nigeria (CBN) and other factors.

“We expect Imported Food Inflation and the Core Index M-o-M growth to ease marginally due to recent appreciation in parallel market FX rate and largely stable energy prices.

“Hence, we forecast Y-o-Y Headline Inflation to trend further southwards to 16.9 per cent  in April due to lower M-o-M Consumer Price Index (CPI) growth projection of 1.3 per cent and subsisting effect of high-base factor,” the experts from Afrinvest stated.

While many Nigerians had expected that with the persistent declines in inflation numbers, cost of consumer items will come down, the former of CBN last week explained that this was not going to be so.

According to him, what is meant by moderation in inflation is that the rate of increase in prices or the percentage at which prices are increasing has reduced.

“Remember that we are talking about percentage change in the increase.  It does not mean that prices of goods and services are decreasing,” the economist explained on the sidelines of a recent investors’ conference in Lagos.

Also, experts from another Lagos-based financial advisory services firm, Financial Derivatives Company (FDC) Limited are of the view that headline inflation rate will decline to 16.8 per cent in April from 17.26 per cent  recorded in March.

This is mainly attributable to waning base year effects they said, and the positive impact of the CBN’s injections into the forex market.

However, the analysts said an upside potential towards a moderate inflation trend will be a function of the continued aggressive intervention in the forex market by the CBN.

Meanwhile, Nigerian Tribune checks revealed that commodity prices maintained their upward trajectory last week with further spikes in the price of rice, tomatoes and other items.