Harvest Season, Base Year Effects to Keep Inflation in Check
Harvest season and base effects are expected to keep Nigeria’s headline inflation rate in check, some analysts have projected as National Bureau of Statistics is set to publish consumers price index report for July next week.
In April 2021 headline inflation made the first reverse after a 19-month consecutive rise. However, the slowdown has been sustained two months after while analysts projected that price level would see further moderation in the coming months. The decline is attributed to the low base effect which has been a key driver of the nation’s disinflation trend.
“We conducted a pre-consumers price index report analysis, and our findings suggest that the Headline inflation rate – a measure of the average change in the price level of both food and non-food items- will descend by a minimum of 22 basis points to 17.53% year on year from 17.75% in the preceding month”, Atlass Portfolios said in a report.
“This modest disinflation, we believe will be driven mainly by the joint decrease in both the Core inflation, that is, non-food items price index and food inflation or food price index.
“Our position is based on a projection of convergence performance of the two sub-components of the Headline inflation – Food price and Core price, all other items less farm produce, indexes, in July”, analysts added.
“From our analysis, the food price index which mirrors the direction of change in the average price of farm produce is expected to descend to 1.05% month on month, as against 1.11% month on month in June and slide on a year-on-year basis to 21.25% year on year, attributed to base effects and harvest season, compared to 21.83% y/y in the previous month”.
Analysts said the month-on-month food price index which reflects the actual direction of changes for the month is expected to decline due to slight price decreases noticed on some major food items including – Yam, Pepper and Tomatoes in July.
This also corroborates the global trend for July, as reported by the Food and Agriculture Organization (FAO) of the United Nations (UN).
According to the latest statistics by the UN agency, the average global food price index declined by 1.6 points in July to 123.0 points owing to a decrease in the average global prices of Diary, Cereals and Vegetable Oils.
Despite the low inflows of about $2.75 billion, 6% lower than $2.72 billion in June, through the Investors and Exporters window in July, which by extension led to Naira depreciating by 0.16% against the dollar from ₦410.7 at the end of June to ₦411.44 in July.
Read Also: Analysts say Electricity cost may fuel core inflationary pressures
“Our analysis revealed that the Core inflation index, which mirrors the direction of change in the average price of all items less farm produce, is expected to fall both on a month-on-month and year-on-year basis. We expect Core inflation to print at 0.71% month on month from 0.81% in June and 13.05% year on year from 13.09%. We believe this will be driven mainly by the base year effect”, Atlass Portfolios analysts said.
Analysts said they are expecting base year and harvest season effects, supported by the decline of the food price index in July, to drag the inflation rate to print at 17.53%.
Harvest Season, Base Year Effects to Keep Inflation in Check
