Experts estimate inflation to rise to 17.2% in July

Economic Intelligence Group, EIG at Access Bank Plc, yesterday, forecasts 17.2 per cent inflation rate in July from 16.5 per cent posted in June, 2016, a development they attributed to the rising prices in both consumer and non consumer goods.

The Group said the rise in its forecast is on the background of National Bureau of Statistics (NBS) scheduled release of inflation figure for July 2016.

The group said, “Our methodology adopts an autoregressive analysis of past prices, while it recognizes all the assumptions used by the NBS in its computation of monthly composite consumer price index (CCPI). “The expected upward momentum in headline inflation in July reflects increases in both food and core components of inflation.”

Continuing it said “The food component which has the largest weighting in the inflation basket will be responsible for a substantial amount of the overall price pressure. The uptick in prices from items such as fish, meat, vegetables and bread on the back of higher transportation and distribution cost will push inflation rate for the month of July higher.

“The core index should also inch up slightly due to cost push factors on the back of continued depreciation of the Naira. The local currency depreciated more than 28 per cent against the green back in the interbank and parallel market over the levels in June.

“The pass-through effect will be seen in the prices of imported items such as motor car and vehicle spare parts. Increases in cost of passenger transport by air will further drive the core index higher.

“The nation’s reliance on imports of raw materials, refined products and consumer goods implies that a weaker naira will compound the effect of imported inflation” they stated.

They expressed the view that rising inflation will throw real returns for investors further into negative territory.

According to the Group “We anticipate an uptick in yields across the curve as the market continues to price in the effect of higher inflation rate, they explained, noting further that Central Bank of Nigeria will continue to maintain its tightening posture in the second half of the year.

“In the last MPC meeting, in spite of recessionary risks, the Central Bank MPC increased the interest rate to 14 per cent in a bid to dampen the foreign exchange pass-through and attract foreign investment inflows.”