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Analysts predict further rise in inflation

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Analysts at Financial Derivatives Company (FDC) have projected that inflation will increase marginally by 0.07per cent to 11.35 per cent in October from 11.28 per cent in September. In a note obtained by New Telegraph, the experts stated: “ Headline inflation is projected to increase marginally by 0.07% to 11.35% in October. If our projections are accurate, it will mark the 3rd consecutive month of rising inflation after a sustained period of declining price level.”

They said that the primary driver of this increase remains higher food inflation, adding: “ Floods and insecurity in agrarian states of the middle belt resulted in a decline in agricultural output and an increase in the prices of commodities such as onions, pepper and melon.” In addition, the analysts attributed the expected rise in inflation to the increase in the price of diesel. According to the FDC: “The average wholesale (depot) price of diesel increased by 2.38 % to N215/liter in October.

The retail price of diesel in Lagos is as high as N251/liter. This reflects a higher logistics cost, which could drive up the operating expenses of firms. The price of premium motor spirit (PMS) also increased across the country.” However, the analysts said that the month-on-month (MoM) sub-index would decline marginally by 0.01per cent to 0.82per cent (10.48% annualized) in October due to the harvest.

“Other moderating factors, the analysts pointed out, include an increase in power generation as well as stability in the exchange rate. Specifically, the analysts said: “Average on-grid power output increased by 6.77% to 3,752.23MWh/h. This is expected to have a positive impact on aggregate output and also reduce the demand for alternative source of energy such as diesel. The relative stability in exchange rate at the parallel market (N361/$-N362/$) could filter through to stable cost of imports.”

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