Adequate food supply is expected for much of Q3 2015, and possibly
till year end, Financial Derivatives latest economic bulletin has said.
It states that recently, favourable food harvest, adequate rainfall
and an appreciation of the naira have had a positive impact on food prices and the economy as a whole adding that it expects “adequate food supply for much of Q3 2015, and possibly till year end”.
According to the report, “The acute uncertainty in the forex market, despite momentary gains in the naira, will fuel additional
inflationary pressures as the market prices the uncertainty into the costs of goods. While there is usually increased demand during the last quarter of every year due to festivities, lower consumer
purchasing power will lead to lukewarm sales; hence, there will be no demand-pull inflation. Also, money supply has been curbed by CBN’s administrative measures aimed at mopping up excess liquidity in the system.
Another variable that would be
important to determining
inflationary direction is oil price. Further decrease in oil prices
would put intense pressure on the external reserves and the naira.”
On inflationary expectation for August, the report states that an
expected bumper harvest will lead to increased food supply, ultimately resulting in a seasonal fall in food prices.
“Furthermore, the ephemeral appreciation of the naira due to the upsurge in dollar cash supply is expected to reduce prices of imports, thereby curtailing imported inflation.
We expect these factors to have
a consequential impact on this month’s inflation,” it adds.
It notes that the business community should not entertain any fear of political instability because the “current administration’s cabinet is gradually taking shape”.
“In particular, the restructuring of the leadership of the NNPC with
the appointment of credible individuals to the position of Group Managing Director and Executive Director underscores the
administration’s resolve to ensure
transparency and accountability.”
It stated that as the timeline given by the administration on the
appointments of ministers and heads of various parastatals approaches, “we expect more appointments to be made”.
This, according to the report, would have a corollary effect in
removing the uncertainty element, which is factored into the cost of doing business.