Consumer prices in Nigeria is estimated to increase for the 8th consecutive month in August 2015 to 9.33%±0.07%, 1.33% above the previous month. This is an indication of the poor macroeconomic condition which have seen the stock market lose over $10bn in three months and a decline GDP growth rate to a 10-year low of 2.35% in Q2 2015. The lagged impact of the irregularity recorded in the supply of Petroleum products in June as well as the late onset of rain are other factors to weigh in the Consumer price Index (CPI) for August 2015.
So far, supply and logistics challenges as well as the planting season exacted pressure on the food index while currency pressures and capital control measures by the Central Bank of Nigeria (CBN) influenced the surge in non-food items. As a result, the impact of the harvest season which reflects yearly in the August inflation index is anticipated to be delayed this year given the projected 1.33% increase from the 9.2% recorded in July 2015. However, this is likely to be the last increase in the inflation statistics for this year as the impact of the harvest season filters-in between September and December.
Forex and Consumer prices
At the foreign exchange market, the naira was unchanged from the level (N198.9/$) in July at the interbank market but gained 4.78% at the parallel market to close August at N219/$ from N230/$ in July. This was due to the reduced currency pressures at the interbank market following the CBN’s exclusion of some items for funding at the interbank foreign exchange market. The resultant impact was increased volatility at the parallel market, which was addressed by other capital control measures. This contributed to the gain recorded in the parallel market. Therefore, the impact of the forex market development is in line with the expectation of a gradual moderation in consumer prices (specifically on import consumer goods and the core inflation index) in the coming months.
Outlook – Moderation Likely
Initial estimation for the months ahead (September-December 2015) shows a gradual moderation in the headline series. This outlook is principally due to the anticipated impact of the delayed harvest season on the food index while the capital control measures taken by the CBN may be insufficient to address the impact of the currency volatility on the non-food category of the inflation index due to inherent uncertainties in the foreign exchange markets.
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