Nigeria’s falling inflation contradicts market reality, says FDC

The drop in inflation rate in May for the second straight month contradicts market reality, analysts at Financial Derivatives Company Limited have said.

The National Bureau of Statistics disclosed on Monday that inflation rate fell to 17.93 percent in May from 18.12 percent in April.

The Lagos-based FDC, led by economic expert Bismarck Rewane, said contrary to analyst expectations, the decline in consumer price inflation seemed to be more of a trend than a blip.

It said in a new report that the headline inflation fell again in May primarily due to a fall in the food sub-index to 22.28 percent from 22.72 percent in April.

“However, this contradicts market reality as the price of major staples (garri, bread, yam, plantain, beans, tomato, pepper, indomie and onions) climbed by an average of 16.8% in May. Imported commodities are not exempted as currency weakness continues to heighten import costs,” the analysts said.

They noted that s further breakdown of the NBS report showed that month-on-month inflation rose by 1.01 percent and core inflation edged higher by 0.41 percent to 13.15 percent as health care, transport and the costs of other services climbed.

The analysts said, “The price of staples, services and other commodities could remain elevated in the near term due to insecurity, exchange rate pass-through and high energy costs.

“Noteworthy, is the rising concern of low crop yields due to low rainfall and reduced planting by farmers that could exacerbate inflationary pressures. Rising inflation will continue to taper disposable income.”

FDC noted that the World Bank stated this week that rising prices had pushed about seven million Nigerians below the poverty line.