Inflation Seen Rising 0.4% In April | Independent Newspapers Limited
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Inflation Seen Rising 0.4% In April

Posted: May 6, 2016 at 5:58 am   /   by   /   comments (0)



*Tight Monetary Policy Imminent


The lingering fuel scarcity, which had had debilitating effect on economic activities, is seen to have further pressured consumer prices in April, with analysts projecting a steep rise in inflation rate for the month.

Year-on-year inflation rate for April is tentatively put at 13.2%, a 0.4% higher than that of March (12.8%), meaning that if the projections are right, it will be the fourth consecutive monthly increase for the year 2016.

According to Financial Derivatives Company (FDC) in its Economic Bulletin released on Thursday its forecast accuracy could mean a head turning for the MPC, which have barely recovered from the spike in March.

FDC says rising transport costs and seasonality are driving increase in costs of food staples and perishables, adding that a ‘disequiliberated’ exchange rate and its distortionary impact on monetary stability.

It further states that consumer resistance may build up which may result in expected decline of inflation rate to 12.5% end May.

The financial consultants in their economic News and Views delivered at the Lagos Business School also state that unemployment and underemployment are expected to increase to 30% as more and more companies are shedding personnel weight.

For example, Schlumberger shed about 20,000 jobs globally in 2015 with the Nigerian operations inclusive. FirstBank, Nigeria’s foremost financial institution recently announced that it would shed about 1000 jobs in Nigeria as a result of major restructuring and cost efficiencies. Other layoffs include FCMB, Guinness, Ecobank and Nigerian Bottling Company (NBC).

Other macroeconomic indices reviewed by FDC include external reserves currently put at $27 billion, exchange rate now traded at N321 per dollar, leaving the gap between the parallel and official rate at 62 percent as against 101 percent figure in February. It would be recalled that Moody, an international rating agency, has downgraded Nigeria’s rating to B1 from Ba3 on the basis of external reserves vulnerability.

Reacting to the report, Dr. Ayo Teriba, MD, Economic Associates, said he does not share the view that inflation rate will increase in April. He said year-on-year inflation figure is misleading rather; “we should be looking at the month-on-month (M-o-N) figure, which is lower in March than the February figure.

He stressed that the lower M-o-N figure of the month of March shows that there is no need for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to panic to the extent of raising Monetary Policy Rate (MPR) in the coming meeting.

Dr. Teriba said it is only when there is persistent increase in the m-o-m that the regulatory authority could think of moving the MPR upward.

Muda Yusuf, Director General, Lagos Chamber of Commerce and Industry (LCCI), said it is going to be a bad news for business operators in the country as they already had many issues affecting their operations.

He said for example they are already faced with the issues of power failure, lack of foreign exchange to procure raw materials, fuel shortage, high interest rate, adding that many businesses may die as a result of that.

“It is going to be the last straw for many businesses in the economy as they are already faced with many challenges from monetary policy”, he said, adding that Central Bank of Nigeria (CBN) should relax the monetary policy to make forex available to the industry operators.