FDC predicts inflation rate to increase to 12.1%

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INFLATION CHART

Analysts at the Financial Derivatives Company Ltd have projected an increase of 0.7 per cent in the March inflation number to 12.1 per cent.

The company said this in its latest economic report in Lagos.

 

It would be recalled that the February rate stood at 11.4 per cent.

 

FDC noted that the month of March was unique as the fuel scarcity intensified and higher transport costs filtered through to commodity prices such as beans, tomato and pepper.

 

“While our initial time series analysis projected an increase of 0.4 per cent, the severity and longevity of the prevailing fuel scarcity has distorted price levels.

 

“Our retail study showed that prices of many consumer goods have remained stubbornly high and in some cases increased in spite of consumers’ resistance.

 

It also said that that the factors that contributed to the spike in inflation include season, cost push factors, money supply and forex shortage.

 

“These factors while transient in nature are becoming more permanent.

 

“As these factors grow increasingly embedded, they are making consumers panic.

 

“Anticipated inflation is more important because of the pass through effect of increased demand and expectations of higher prices on current prices.”

 

The investment company, however, said that the effect was that it had impact of a sustained level of high prices.

 

According to FDC, the dichotomy between urban and rural prices may persist given the impact of rising transport costs and exchange rate pressures on urban prices.

 

It also said that the price of diesel, a major determinant of food transportation costs, had increased to N130 per litre.

 

The report added that inflation would likely remain high in April as the exchange rate uncertainty continues; while the consumer prices were expected to remain high.

 

“In addition, with fuel scarcity expected to persist till next month in spite of NNPC’s April 7 deadline, transportation costs will continue to increase.

 

“Therefore, we expect inflation to still remain in the region above 11 per cent.

 

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