For the first time in 15 months, the Consumer Price Index (CPI), which measures the rate of inflation, dropped to 17.78 per cent (year-on-year) in February 2017, the National Bureau of Statistics (NBS) said on Tuesday.
The naira also maintained its momentum against the dollar on the parallel market, rising to N454 on news that the Central Bank of Nigeria (CBN) had pumped another $195 million into the interbank foreign exchange market.
In its latest CPI report released on Tuesday, NBS said the figure was 0.94 per cent points lower when juxtaposed with the 18.72 per cent posted in January.
According to the NBS, the new figure marked the first time in 15 months that the headline CPI has dipped on a year-on-year basis.
The NBS traced the development to the effects of a slower increase in food and non-food prices as well as favourable base effects over 2016 prices.
However, price increases were recorded in all divisions that constitute the headline index, said the report.
Housing, water, electricity, gas and other fuel, education, food and alcoholic beverages, clothing, foot ware and transportation services provided the major divisions that accounted for accelerating the pace of increase in the headline index.
On a month-on-month basis, the headline index rose by 1.49 per cent in February 2017, representing a 0.48 per cent points higher from the 1.01 per cent recorded in January.
Similarly, the food index rose by 18.53 per cent (year-on-year) in February, up by 0.71 per cent points over what was recorded in January (17.82 per cent).
The NBS report indicated that the rise was propelled by increases in the prices of bread, cereals, meat, fish, potatoes, yams and other tubers, and wine, while the slowest increase in food prices year-on-year were recorded by soft drinks, coffee, tea and cocoa.
Price movements recorded by all items less farm produce or core sub-index rose by 16.00 per cent (year-on-year) in February, down by 1.90 per cent points from the 17.90 per cent recorded in January.
The highest year-on-year increases were in electricity, liquid and solid fuels, fuels and lubricants for personal transport equipment, clothing materials, other articles of clothing and clothing accessories, and books and stationeries.
The urban index also rose by 18.57 per cent (year-on-year) in February from 20.31 per cent in January while the rural index increased by 16.98 per cent in February from 17.34 per cent in January.
Equally, on a month-on-month basis, the urban index increased by 1.52 per cent in February from 1.03 per cent posted in January, while the rural index rose by 1.47 per cent in February from 1.00 per cent in January.
The composite food index rose by 18.53 per cent in February 2017, a rise that stemmed from increases in the prices of bread, cereals, meat, fish, potatoes, yams and other tubers, vegetables, wine, milk, cheese and eggs, sugar, jam, honey, chocolate and confectionery and fruit.
On a month-on-month basis, the food sub-index increased by 1.99 per cent in February, up by 0.7 per cent points from 1.29 per cent recorded in January.
The “All Items Less Farm Produce” or Core Sub-index, which excludes the prices of volatile agricultural produce declined by 16.0 per cent in February 2017, 1.90 per cent points from 17.90 per cent recorded in January.
Commenting on the 0.94 percentage points decline in inflation in February, the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, attributed the moderation in the CPI largely to the base effect.
“The base effect would be more pronounced in May 2017 inflation because it was in May 2016 that the uptick was higher. So, if nothing significant occurs in the economy, we are going to see a drastic reduction, to maybe single digit in May 2017 inflation,” Chukwu predicted in a chat with THISDAY.
Also, the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, described the drop in February CPI as good news for the Nigerian economy.
“We expect inflation to drop further in March because the base-year effect is waning and would wane further. It was in February last year that this ‘madness’ started.
“But in February this year, we started seeing improved foreign exchange supply and if that continues, we expect inflation to continue to decline.
“So, good things are happening and confidence is gradually returning to the economy,” Rewane added.
Ecobank Nigeria’s analyst, Kunle Ezun, who said the drop in inflation was expected, predicted that the CPI might fall to 14 per cent at the end of the year.
“The issue now is how does that translate to an improvement in the living conditions of Nigerians? For me, government must ensure that the power sector is fixed so that the high cost of power by firms and households is reduced.
“There is also the need to bring down the cost of transportation,” he added.
The naira also edged higher on the parallel market on Tuesday to close at N454 to the dollar, stronger than N460 to the dollar from the previous day, as the CBN sustained its intervention in the foreign exchange market.
The central bank intervened with a total of $195 million on Tuesday.
A breakdown showed that it auctioned $150 million through special wholesale FX forwards and sold $45 million for invisibles.
Confirming this, the acting Director, Corporate Communications of the CBN, Mr. Isaac Okorafor, said all the pent-up demand for visibles had so far been cleared, while the demand for invisibles “has been dropping”.
Okorafor said that the central bank was determined to sustain liquidity in the FX market in order to enhance accessibility and affordability for genuine end users.
Okorafor also cautioned dealers not to engage in any unwholesome practices detrimental to the smooth operation of the market, warning that the CBN would impose heavy sanctions on any organisation or official involved in such acts.
However, the spot rate of the naira on the interbank market depreciated to N306.25 to the dollar on Tuesday, after the central bank sold the dollar at its highest level ever on the official market.
The central bank sold $1.5 million at N305.75 to the dollar. Commercial lenders then resold dollars at a 0.50 naira margin, leaving the naira at N306.25 at the end of trading on Tuesday.