Inflation tapers on fuel prices reduction, low consumer demand

Agency Report

The gradual decrease in the prices of petrol and the low consumer demand occasioned by income constraints is majorly responsible for the declining inflation, Bismarck Rewane has said.

And what’s more, the managing director of Financial Derivatives Company (FDC) Limited said the magnitude of fall in inflation is significant.

“Sticking to the old methodology and base year, our market survey and simple regression model revealed that inflation will decelerate by 1.24 per cent to 32.11 per cent from 33.35 per cent in January”, said Rewane.

It will be recalled that Nigeria’s Rebase inflation came down to 24.48 per cent.
That means, going by FDC’s survey, inflation would come down to about 23 per cent.

“The data shows that using both the old and new methodology, inflation is moving in the same direction, that is declining. However, the disparity in the magnitude is quite significant. This trend is driven by a reduction in fuel prices and low consumer demand due to income constraints, which has led to an average of 15 per cent decline in the sales volume of Fast-Moving Consumer Goods (FMCGs),” said Rewane.

Of the commodities tracked, the following stood out in their decline – 50kg bag of rice (N100.000 down to N95,000), 50kg bag of flour (N65, 000down to N60,000). and a bag of Irish potatoes (N200, 000 down to N1,020, 000).

“We also noticed that 82.86 per cent of the commodities in the basket were flat, particularly eggs N67.274, 000) and vegetable oil (N19,500), while 5.71 per cent recorded an increase. In general, there was clear evidence of price disinflation. Traders are holding onto inventory, hoping that prices will rise.

“The question that arises is, “why this trend, and how long will it persist”? In our view, as long as petrol prices remain below N900/litre and the naira trades between N1,550/$ and N1,600/$, this trend is likely to continue until Easter,” he explained.