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2018 outlook: Experts project 12.9% inflation rate in 2018

Following the latest report by the National Bureau of Statistics (NBS) that the Nigeria’s annual inflation has slowed for the 11th consecutive period in December, analysts at CardinalStone Research have predicted improved rate of 12.9 per cent by end of December 2018.

The new statistic report showed that the rate eased to 15.37 per cent against 15.90 per cent recorded in November and 15.91 in October 2017.

It is however, worthy of note that the proposed N8.612 trillion 2018 budget was based on inflation rate at 12.4 per cent, just as the Central Bank of Nigeria (CBN) had predicted a single digit rate by middle of 2018.

But analysts at CardinalStone expressed that Month-on-Month (MOM) food inflation will continue to moderate on the back of federal government and CBN interventions in the agricultural sector as local food production is expected to improve this year.

The Lagos based company in its ‘2018 outlook- a rising tide’ report noted that spike in food inflation was as a result of higher global food prices for staples, higher transport costs as well as the flooding experienced in select south-eastern and central regions of the country.

According the CardinalStone analysts, “The impact of higher food inflation moderated the effect of lower core inflation on Headline inflation in 2017. Notwithstanding, on a MoM basis, we noticed an improving trend in food inflation as MoM food inflation consistently declined from 2.5per cent in May 2017 to 0.9per cent in November 2017.

“We believe this developing trend reflects the progress made on local import substitution, particularly in agriculture where the CBN and the government partnered with Farmers to improve yield and crop production.

“Therefore, we expect food inflation to moderate significantly on a Year-on-Year basis in 2018 on the back of the declining month-on-month food inflation coupled with the high base effect of 2017. Consequently, we expect the decline in food inflation to dampen the acceleration in headline inflation.”

They hinted that higher electricity tariff may threaten core inflation in 2018.

“Should the government decide to implement the new tariffs, we expect to see a significant uptick in core inflation in 2018,” they explained.

Meanwhile, FBNQuest Research in its latest report on Wednesday said, the latest inflation report from the NBS shows headline inflation y/y at 15.4 per cent in December.

“This was the eleventh successive monthly slowdown, and by a welcome 53bps on this occasion. The driver was a steep decline in food price inflation from 20.3per cent to 19.4per cent y/y.

“Our expectation, shared with wire service polls of analysts, was 16 per cent y/y on the basis of higher seasonal demand.

“While the trend in the core measure has broadly reflected the softening of demand in the now-ended recession, food prices have remained stubbornly high because of supply factors, notably insecurity and a pick-up in food exports. We suspect, in the absence of any data, that some harvests have disappointed.

“The NBS commentary isolates the large price increases for lubricants and fuel for personal transport, for solid fuels and for air passenger transport. This is consistent with the anecdotal evidence of fuel scarcity, notably of gasoline/petrol, in the holiday season.

“We see the headline rate falling again to 15.2per cent y/y in January. Base effects will be positive through to June/July, when we see the rate just above 11per cent.

“The monetary policy committee is very unlikely to hold its scheduled meeting next week for what we will charitably call “procedural” reasons, not that we expected a change in stance.”

Meanwhile, the statistics office in its Consumer Price Index (CPI) report for December 2017, disclosed that year 2017 ended the with a rate of 15.37 per cent (year-on-year) in December the same year.

The latest figure, however, showed that 0.53 per cent points lower than the rate recorded in November, represented 11th consecutive disinflation (slowdown in the inflation rate though still positive) in headline year -on- year inflation since January 2017.

According to the report, increases have been recorded in all the Classification of Individual Consumption by Purpose (COICOP) divisions that yield the Headline Index.

On a month-on-month basis, the bureau stated that the Headline Index increased by 0.59 per cent in December 2017, 0.19 per cent points higher from the rate of 0.78 per cent recorded in November.

It stated that the percentage changed in the average composite CPI for the 12 months period ending in December 2017 over the average of the CPI for the previous 12 months period.

The NBS stated that the percentage of average composite CPI was 16.50 per cent in the month, showing 0.26 per cent points lower from 16.76 per cent recorded in November 2017.

Motolani Oseni

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