Thursday, February 04, 2016 9:46 PM / FSDHGroup Research
We expect the January 2016 inflation rate (year-on-year) to slow down to 9.24% from 9.55% recorded in December 2015. The moderation in the inflation rate would be as a result of the base effect of January 2015 and the drop in commodity prices. The National Bureau of Statistics (NBS) will release the inflation rate for the month of January 2016 on February 17, 2016.
The major highlights of the report are:
The prices of commodities that the Food and Agriculture Organization (FAO) tracked in the Food Price Index (FFPI) for the month of January 2016 dropped by varying degrees.
The prices of sugar and dairy products were mostly affected. The FFPI released today, February 04, 2016, shows that the Index averaged 150.4 points. This is 1.93% lower than the revised value in December 2015. The FAO Sugar Price Index was down 4.06% due to better crop conditions from Brazil. The FAO Dairy Price Index fell by 2.95%, due to larger winter milk production in the European Union. The prices of milk powders were mostly affected.
The FAO Vegetable Oil Price Index was down by 1.69%, primarily driven by a marked drop in soy oil prices. The FAO Cereal Price Index was down by 1.66%, due to ample global supplies, increased competition for export markets and a stronger U.S. Dollar. The wheat and maize prices were mostly affected. The FAO Meat Price Index was down 1.13% as prices fell in most of the meat categories, with the exception of pig meat.
Our analysis indicates that the value of the Naira depreciated at both the inter-bank and parallel market by 0.01% and 11.91% to close at US$/N199.10 and US$/N306.50 respectively. Despite the decline in global food prices, the higher depreciation in the value of Naira, particularly at the parallel market, led to an increase in the prices of imported consumer goods in Nigeria between the two months under review.
The prices of food items that FSDH Research monitored in January 2016 moved in different directions. The prices of food items such as Irish potatoes, palm oil, garri, meat and fish increased by 12.5%, 7.69%, 5%, 4.17% and 0.34% respectively. However, the prices of onions, tomatoes, and sweet potatoes fell by 59%, 25.83% and 14.29% respectively. Meanwhile, the prices of rice, yam, beans and vegetable oil remained unchanged.
The movement in the prices of food items during the month resulted in 0.71% increase in our Food and Non-Alcoholic Index to 186.96 points. We also noticed an increase in the prices of Education, Clothing and Footwear between December 2015 and January 2016.
Our model indicates that the price movements in consumer goods and services in January 2016 would increase the CCPI to 181.13 points, representing a month-on-month increase of 0.55%. We estimate that the increase in the CCPI in January will produce an inflation rate of 9.24%.