INFLATION TO RISE IN H2'18

While financial market operators expect that the June inflation to be announced today by the National Bureau of Statistics, NBS, will be lower than the 11.61 percent recorded in May, Financial Derivatives Company, FDC, analysts, however, hinted that the 17 months downward trend in inflation will give way to upward trend in the second half of the year. This view was also echoed by the International Monetary Fund, IMF, in the report of the staff mission held from June 29 to July 9, which projected inflation to rise in Nigeria in the second half of the year. FDC analysts stated: Nigerias headline inflation is likely to slip 0.51 percent to 11.1 percent in June, making it the 17th consecutive monthly decline. Like most Sub-Saharan African economies, Nigerias rate of inflation is now coming close to the African average of 10 percent. Whilst this sounds like good news to any observer, it is noteworthy that the rate of decline in the price level has slowed significantly. This is partly attributable to waning base year effects and the normalization of the inflation curve. Also equally significant is the projection that month-on-month inflation is expected to rise again to 1.13 percent (14.40 percent annualized).

The import of this divergence between the monthly and annual inflation movement is that it would appear that the annual inflation is likely to bottom out very soon. On their part, IMF staff stated: Inflation would pick up in the second half of 2018 as base effects dissipate and higher spending and supply constraints in agriculture put pressure on prices. Increased oil exports would keep the current account in surplus, helping stabilize gross international reserves even if the current pace of foreign portfolio outflows continues.

(Punch)