Financial analysts predict further drop in inflation in June, July

Financial analysts have forecasted that the nation’s inflation rate will continue to trend downwards in the month June and through out the year.
The analysts with AfriInvest research group, said in light of the recent breather in food inflation and the persistence of base effect factors coupled with anticipated favourable harvest season in the year, ” we expect the trend to continue playing out for the rest of the year.
Our forecast for the Headline Inflation in June is 10.84 per cent with a conservative 0.89 per cent month on Month (M-o-M) projection given that the highest pressure on M-o-M over the last four years have been recorded in May.
This pitches our year end inflation forecast at 10.2 per cent after taking into consideration all near term developments including the rising energy costs, most especially the prices of Kerosene and Diesel” The FSDH Research expect the inflation rate to drop to a single digit in July 2018 provided there is no food shortage in the country due to of the current rising crisis in the food producing areas in the country.
The research group had earlier projected that there would be further drop in inflation rate to 11.50 per cent in May this year from 12.24 per cent recorded in April.
FBNQuest, the investment banking arm of FBN Holdings, projected that inflation rate in Nigeria would continue its slowdown for the 17th consecutive month, rising by 10.8 per cent in the month of June.
This would represent a drop from 11.61 per cent as published by the National Bureau of Statistics (NBS) last week, down from April rate.
Researchers at FBNQuest had last month projected that Nigeria’s Consumer Price Index (inflation) could rise by 11.3 per cent in May.
Also, the FBN Quest expects that with the June inflation report expected ahead of July edition of the Monetary Policy Committee (MPC) meeting, it could be a good time to finally cut the benchmark Monetary Policy Rate (MPR) for the first time since around July 2016.
The call for rate cut now, FBNQuest argued, is “on the basis of the disinflation trends, for which the committee would normally take some credit, and still hope for a cut of 50bps by year-end.
“That said, the committee’s last communique barely acknowledged the steep decline in headline inflation, and concentrated on the negative impact of the late passage of the 2018 budget (still awaited) and its expansionary stance.” The MPC at its second meeting this year, voting eightto-one to retain the MPR at 14 per cent ; just as the Cash Reserve Ratio (CRR) at 22.5 per cent, Liquidity Ratio at 30 per cent; and Asymmetric corridor at +200 and -500 basis points around the MPR.
The majority of the committee members based their decision on the fact that economic growth recorded so far remains largely fragile and in need of further reforms and stimulus, stating that, for example, the late passage of the budget by the National Assembly, six months after it was presented by President Muhammadu Buhari, as well as expected huge spending ahead of the 2019 general elections, amidst fears that such could spike inflation.
According to the communique signed by the CBN Governor, Godwin Emefiele, “the predominant argument for a hold at this time is to await more clarity on the evolution of key indicators , that is the passage and implementation of the budget, economic activities, and traction in fiscal policy in 2018.” Continuing, the committee also warned about the “high level of uncertainties that could arise from the fiscal operations of government in the near term.
On election spending, the committee believes “tightening would ensure the mop-up of excess liquidity.
Mindful that despite the moderation in inflation, the current inflation rate is still above targeted single digit and that real interest rate only turned positive in the review period.
The objective of the policy stance therefore, would be to accelerate a reduction in the inflation rate to single digit to promote economic stability, boost investor confidence, and promote foreign capital flows with complementary impact on exchange rate stability