Articulating the macroeconomic
state of Nigeria’s economy as at
starting line for 2016 fiscal year the inflationary pressure
appeared to have sustained through last month, despite
declining prices of food and related products in the
At the backdrop of its research, FSDH
Merchant Bank Limited, a Lagos
based investment bank, said it expects the December 2015
inflation rate year-on-year, Y-O-Y, to inch up to 9.42% from
9.37% recorded in the preceding month.
The increase, according to them,
would be driven by higher Food and Non-Alcoholic Beverages
division, and transportation
division due to the fuel shortages
experience across the country almost throughout the
month. On the other hand food prices at the international market in December 2015 had dropped
because of abundant supply, weak global demand and an
appreciating U.S. Dollar.
Consequently, the Food and Agriculture Organization, FAO,
Food Price Index (FFPI) for the month of December 2015
released last week, shows that the Index averaged 154.1 points. This is 0.98% lower than the revised value in November 2015.
According to the FAO, all the commodities included in the FFPI dropped except for sugar and oil prices. The FAO Meat Price
Index was down 1.6% on the heels of reduced import
demand from the U.S. and a surge in output stemming from
the European Union.
FAO Cereal Price Index was down
by 1.28% from the previous month, due to the expectation of additional supply
from the wheat and maize categories. But price of rice was
stable. Dairy Price Index fell by 1.04% and was at its lowest annual average since
Prices of milk powders also fell and those of cheese
were unchanged. However, FAO
Vegetable Oil Price Index was up by 2.10%, primarily driven by soybean oil.
FAO Sugar Price Index was also up by 0.65%, due to concerns over harvesting delays
from the sugar exporting countries caused by harsh
After a brief respite in October, Nigeria’s
Consumer Price Index, CPI, which
measures inflation, inched higher in November. The Headline index
increased to 9.4% year-on-year, marginally higher than 9.3% recorded in October.
The index was driven in part by higher prices within the Food and Non-Alcoholic Beverages
division as well as increases in the Transportation division as a result of fuel scarcity during the period which came with a knock-
on effect impacting
transportation of people and goods across the country.
Food prices as measured by the Food sub-index also increased at higher pace in November, rising to 10.3% Y-O-Y during the month, 0.2% points from rates recorded in October.
All major food groups which contribute to the Food sub-index
increased at a faster pace during the month with the exception of the Fruits group which has been trending lower since June of
2015. Increases in the “All Items less Farm Produce” or Core sub-
index rose at the same rate in
November, the second consecutive month, at 8.7%, as rates have slowed or
held steady for a quarter.
However, the Core sub-index was
weighted upon by slower increases in multiple divisions
such as Clothing and Footwear; Housing Water, Electricity, Gas
and Other Fuels; and Furnishings & Household Equipment
Maintenance amongst others.
On a month-on-month basis, the
Headline Index as well as the Food and Core sub-indices all
increased at a faster pace in November.
The Headline Index in particular increased by 0.7%, 0.3% points higher from 0.4% in October 2015. Factoring in the exchange rate crises FSDH noted “the
higher depreciation in the value of Naira at the parallel market
than the drop in food prices at the international market had a negative impact on local
The prices of food items that FSDH Research monitored in December 2015 moved in different directions. The prices of food items such as sweet potatoes, yam, palm oil, fish, meat
and rice increased by 20%, 18.33%, 8.17%, 6.92%, 4.55% and 2.27% respectively.
However, the price of tomatoes, onions and Irish potatoes fell by
7.21%, 5% and 4.55% respectively. Meanwhile, the prices of garri and beans remained unchanged.
According to the research “the movement in the prices of food items
during the month resulted in 0.95% increase in our Food and Non-Alcoholic Index to 185.25 points.
“We also noticed an increase in the prices of Transportation,
Housing, Water, Electricity Gas and other Fuel between
November and December 2015. “Our model indicates that
the price movements in consumer goods and services in
December 2015 would increase
the CCPI to 179.92 points, representing a month-on-month
increase of 0.87%“We estimate that the increase in the CCPI in December will
produce an inflation rate of 9.42%.