BY BAMIDELE FAMOOFO
As the National Bureau of Statistics is scheduled to publish the headline inflation and related data for February on Tuesday, Bismarck Rewane, Managing Director/Chief Executive Officer, Financial Derivatives Company Limited has predicted that the figure will record a marginal drop.
“Based on our time series model and survey of commodity markets in the Lagos Metropolis, official headline inflation is projected to decline marginally by 0.03% to 15.57% in February,” he said.
Rewane hinted that the survey was carried out at the end of February, which was the beginning of the petrol scarcity and adulterated fuel scandal, noting that the impact of the spike in the black market price of petrol and the skyrocketing of diesel price had not manifested in retail prices.
However, FDC mentioned in its monthly bulletin that core inflation (inflation less seasonalities) is estimated to increase by 0.11 percent to 13.98 percent, even though domestic food prices are falling due to weak aggregate demand, consumer price resistance and late harvest; living costs continue to climb. One price propelling factor is the pass-through effect of higher energy prices on transport and logistics costs. Notably, the scarcity of fuel has created some level of market inefficiencies and encouraged arbitrage practices.
Currently, petrol and diesel are selling at different prices across the country, with some selling as high as N250/litre and N650/litre respectively.
Other inflation stoking factors considered by FDC in its report include the Russian-Ukraine conflict which is worsening global supply chain disruptions, pushing up commodity prices. In February, the global food price index reached an all-time high of 140.7points due to an increase in the vegetable oils, dairy & cereals price indices. Year-to-date, the price of wheat and corn surged by 64.79 percent and 21.65 percent respectively.
Rising global commodity prices, coupled with currency pressures is pushing up the price of import dependent commodities like flour. The price of a 50kg bag of flour is currently N21, 600, up 5.37 percent from N20, 500 last month.
“Accordingly, domestic airfares are up 100 percent with the new price floor set at N50, 000. This is due to higher jet fuel prices, spare part imports and forex scarcity. A Lagos-Abuja return ticket is now selling for over N100, 000. This will further heighten inflationary pressures,” Rewane noted.
Month-on-month inflation, which is a better reflection of current prices and inflation expectations, is expected to rise to 1.52 percent (19.82% annualized) from 1.47% (19.24% annualized).
Annual food inflation will fall again but imported food inflation will remain elevated as the year-on-year food index is projected to fall slightly by 0.14 percent to 16.99 percent due to weak aggregate demand and late harvest of major agricultural produce. The price of tomatoes, pepper and onions declined by an average of 28.72 percent in February before increasing slightly in early March due to higher logistics costs.
FDC disclosed that most traders were unable to pass-on the bulk of the additional expense to consumers due to weak aggregate demand and price resistance.
“Another noticeable trend during the month is an increase in the price of commodities with import content, suggesting that imported inflation will remain elevated. The price of flour rose by 5.37 percent to N21, 600 per bag due to rising global wheat prices and persistent exchange rate pressures,” Rewane noted.
