Inflation Slowdown Has No Effects, In Reality, Says Firm

Must Read

- Advertisement -

Nigeria’s inflation rate slowdown has no effect in realities as pressure continues to weigh on the local currency, naira, in the foreign exchange market, says Atlass Portfolios in an email to clients.

The recent inflation report from the National Bureau of Statistics figure shows consumers’ price index dropped further in July 2021.

According to the latest reading, the headline inflation rate fell to 17.38 per cent from 17.75 per cent in June, marking the fourth consecutive month’s decline after it had galloped for 19 months.

However, realities on the streets speak differently than what the statistics say as pressure has become stronger on market prices of goods and services including gas, diesel and kerosene.

- Advertisement -

“Prices have remained relatively high in the local market, widening pressures on Nigerians finances”, analysts polled by MarketForces Africa said while noting that harvest season has not peaked to allow moderation in food item prices.

On currency inflation, it is noted that the weak purchasing power of naira and dearth of investment alternatives are reducing the strength of the middle-class economy, resulting in dwindling private investments. The unemployment rate remains abysmally highly while food prices and partial scarcity have become a threat to survival especially in the southern part of the country.

Looking ahead, Afrinvest analysts said they expect the impact of the pressure on the Naira from the recent ban on FX sale to BDCs to drive core inflation rate to 13.8% year on year, 1.4% month on month in August.

“Nevertheless, we believe that the impact of a high base-year effect on food inflation would result in further moderation of the headline index to 16.9% in August 2021”, says Afrinvest.

- Advertisement -

Market realities show that food inflation is far from slowing down. As such, the Nigerian streets estimates of the average increase in foods prices differ significantly from formal inflation calculations from the Bureau of Statistics, leading to questioning whether the data is meant for the poor or financial markets.

Amidst inflationary burdens with pressure on the Naira in the foreign exchange market, increased electricity tariffs and high Gas costs, the Nigerian headline inflation rate slowed to 17.38 per cent, analysts said.

Atlass Portfolios Limited had projected the consumer price index will slowdown year-on-year given the base year effects, which eventually played out. The base effect will keep inflation rate movement downward for the rest of the year, according to consensus analysts’ project

Explaining the NBS figures which shows moderation in the headline inflation was driven by the 80 basis points decline in the food inflation, while the Core inflation (All-Items Less Farm Produce) expanded by 63 basis points.

- Advertisement -

Accordingly, the composite food inflation index dipped 0.80 per cent to increase by 21.03 per cent in July 2021, compared to 21.83 per cent in June 2021.

This means that food items became less expensive in July 2021 as against June 2020, and less expensive compared to June 2021, as the index slowed to 0.86 per cent in July 2021, from 1.11per cent in June 2021, impacted by the harvest season period.

On the other hand, Core inflation which excludes all agricultural produces, stood at 13.72 per cent year on year, up 0.63 per cent, and 1.31 per cent month on month increase by 0.81 per cent after a sharp decline in June.

The increase in Core Inflation was a result of a price increase in Vehicle spare parts, Major household appliances, Pharmaceutical products, Furniture and furnishing materials, Medical services and Hospital services.

Notably, the Naira in the month of July, both in the Investors and Exporters Window and parallel markets, depreciated by 0.07 per cent and 2.59 per cent, to close at N411.10 and N515 a dollar, respectively, following the stoppage of dollar sales to the BDCs by Central Bank.

“Amidst the existing policies by policymakers, we expect the headline inflation to continue to slow down on the back of the base year effect but have no impact in reality as pressure continues to weigh on the Naira in the foreign exchange market”, Atlass Portfolios said.

- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

- Advertisement -


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

Tesla Accelerates Into Most Valuable Automotive Brand Position-Brand Spur Nigeria

Tesla To Build 300,000 Cars From Q1 – Q3 Of 2021,...

Tesla Inc. is expected to produce 300,000 cars in the first nine months of the year from its factory in Shanghai. This forecast is capped...
- Advertisement -

Latest News

Tesla To Build 300,000 Cars From Q1 – Q3 Of 2021, Despite Chip Shortage

Tesla Inc. is expected to produce 300,000 cars in the first nine months of the year from its factory in...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -spot_imgspot_img