Nigeria’s statistics bureau releases inflation report as central bank’s MPC meets

Inflation rate in Nigeria decreased to 11.26 percent year-on-year in October 2018, falling for the first time since increasing to 11.14 percent in July. The October rate is 0.02 percent points lower than the rate recorded in September 2018 (11.28 percent).

However, increases were recorded in all Classification of Individual Consumption by Purpose (COICOP) divisions that yielded the Headline index, according to the CPI and Inflation Report October 2018 released on Tuesday by the National Bureau of Statistics (NBS).

The composite food index rose by 13.28 percent in October 2018 compared to 13.31 percent in September
2018, caused by increases in prices of fruits, meat, vegetables, potatoes, yam and other tubers, Bread and cereals, and Oils and Fats. On month-on-month basis, the food sub-index increased by 0.82 percent in October 2018, from 1.00
percent recorded in September.

However, the “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at stood at 9.9 percent in October 2018, up by 0.1 percent from the rate recorded in September 2018 (9.8) percent.

The inflation report comes on the first day of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria. The final 2018 MPC meeting earlier scheduled for 19 – 20 November was moved to 21 – 22 November due to a Muslim public holiday observed on 20 November.

The inflation report is not expected to have any impact on the MPC decision as the committee is expected to keep benchmark interest rate unchanged at 14 percent, the same level it has been since 2016.

Speaking recently at the Nigeria Investment Conference organised by the Chartered Financial Analyst (CFA) Society Nigeria, CBN Governor Godwin Emefiele had said there was nothing wrong in keeping interest rate at the same level for years, citing examples of developed economies that have done same. The governor has also never stopped talking about his commitment to defending the naira regardless of how it affects forex reserves in a bid to keep the economy as stable as can be ahead of the 2019 elections.

On the last of Nigeria’s MPC meeting, South African Reserve Bank (SARB) Governor Lesetja Kganyago is expected to announce the bank’s MPC decision which analysts say is too close to call. However, “changes in interest rates will require a sufficient time horizon for the required inflation limiting impacts to manifest,” said Maura Feddersen, an economist at PwC. “With inflation peaking in the second quarter of next year, the MPC faces a closing time window to increase interest rates as a way to keep inflation inside the target band.

“Indeed, the MPC’s decision will likely hinge on the SARB’s expectations for movements in the rand exchange rate and fuel prices.”