Nigeria’s inflation falls to 11.23% in June, lowest drop in 5 months

Nigeria’s inflation rate has dropped in June for the 17th consecutive time, even as it recorded the lowest drop in five months indicating the economic indicator might soon rebound.

In the June inflation data by the National Bureau of Statistics (NBS) on Monday, the nation’s Consumer Price Index (CPI) fell from 11.61 percent year-on-year (YoY) in May 2018 to 11.23 percent YoY in June 2018.

​The CPI measures inflation, the composite changes in the prices of consumer goods and services, such as food, transportation, and medical care, purchased by households, over a period.

The five-month low in the headline inflation implies the inflation, which has been declining consistently after it peaked 18.72 percent in January 2017, is approaching the threshold of upturn.

According to the data, food inflation dropped to 12.98 percent YoY in June down from 13.45 percent recorded in May, while core inflation, which excludes agricultural produce, stood at 10.4 percent in the review month down from 10.7 percent recorded in the previous month.

The statistics bureau said the headline inflation rose on a month-to-month basis to 1.24 percent in June from 1.09 percent in May, adding that Rivers recorded the highest YoY inflation rate in the month with 13.82 percent, while inflation rate of Kwara was the lowest at 8.16 percent.

The Financial Derivative Company (FDC) had in its latest Bi-monthly report forecast that the country’s headline inflation might likely to slip by 0.51 percent to 11.1 percent in June.

“Whilst this sounds like good news to any observer, it is noteworthy that the rate of decline in the price level has slowed significantly.

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“This is partly attributable to waning base year effects and the normalization of the inflation curve,” the analysts said in their monthly Economic Bulletin for the month of June.

FDC said it believed that the surge was driven by the increase in the price of diesel and the intensity of the herdsmen conflict in the middle belt Nigeria, causing a significant reduction in commodity output. A development which may likely halt the consistent drop in the headline inflation index.

According to FDC, the slide in inflation and the threat of a rebound would make the next Monetary Policy Committee (MPC) session, scheduled to hold today and tomorrow, July 24, “an interesting but difficult meeting.”

Last week, the International Monetary Fund (IMF) urged the government to urgently put in place coherent set of policies to reduce vulnerabilities and increase growth, noting that inflation would rebound in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices.

Nigeria’s inflation had dropped for the sixteenth consecutive month in May to 11.61 percent, its lowest level in more than two years. The real Gross Domestic Product, which measures economy growth, rose by 1.95 percent in Q1 2018 from a year earlier.

The CBN in its Monetary Policy Committee (MPC) meeting in May, had kept the interest rate, which determines the rates at which banks give out loans, on hold after it raised it by 200 basis points to a record high of 14 percent in July, 2016 to curtail inflationary pressures.

CBN Governor, Godwin Emefiele, in his personal statement in a communique of the meeting, noted that the cyclical recovery of the economy was still fragile, adding that inflation was declining but remained high and outside acceptable band, with probable risk of upturn in the short-term.

Emefiele said, “The current budget outlay of over N9 trillion which is expected to be rapidly implemented in the last half of the year, the anticipated huge elections spending, and the on-going interest rate hike by the US Fed threaten the favourable macroeconomic in the short-term if these risks are not adequately hedged.”

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