Indications have emerged that there was increased liquidity in the financial system due to the surge in the average opening position of banks by 1,729 per cent to N253.12 billion long from N13.84 billion long.
Analysts at the Financial Derivatives Company Limited (FDC), who made the observation in a monthly economic bulletin also estimated that month-on-month inflation will increase by 31 basis points (bps) to 1.09 per cent (13.89 per cent annualised).
According to them, this is expected to cause an increase in inflation, a spike in bank liquidity does not mean an increased money supply as broad money (M2) contracted by 5.54 per cent (annualised) in October to N22.5trillion.
Also, Food index is likely to decline to 20.24per cent says FDC year-on-year in December from 20.30per cent; even as month-on-month food inflation is projected to increase to 1.31per cent (16.97 per cent annualised) from 0.84 per cent (10.58 per cent annualised).
In the week ahead, the National Bureau of Statistics will make available inflation figures for the month of December 2017.
Other analysts said the trend so far supports an upshot in month-on-month inflation due to the festivities inherent with the month of December.
“Thus, an increase in month-on-month inflation is expected. Moreover, the gridlock in fuel supply in the month of December will have a knock on effect on transportation and food prices,” the firm stated.
The upswing in core inflation was sustained for the second month in a row as it rose from 12.14 per cent to 12.41 per cent. The recent dynamic in core inflation has eroded earlier perception that the upswing in core inflation in the month of October was a sudden deviation.
The recoil in core inflation seems to be more prevalent given the trend. Thereby, an increase in headline inflation for the month of December is imminent the analysts said.