…Traders say report unlikely to disrupt Wednesday’s T.Bills auction
Despite accelerating to 17.9 percent compared to the same period last year, September’s month-on-month inflation of 0.8 percent is the lowest yet in 2016, and this may give Nigeria’s Central Bank some respite.
Stuck between decade high inflation rate and an economy contracting for the first time since 1991, the apex bank has been faced with a policy conundrum so far.
The bank maintained benchmark interest rate at 14 percent at their last meeting, resisting calls to cut rates to stimulate credit within the economy, after its governor, Godwin Emefiele, made clear his intention to avert what he called “a case of too much money chasing few goods.”
Analysts say the decrease in month-on-month inflation, the least in eight months, would lift significant pressure off the bank which has been criticised, even by Kemi Adeosun, Nigeria’s Finance Minister, for opting to tame inflation at the expense of growth.
“At this point, inflation pressure isn’t substantial considering the moderation in month-on-month increase in the CPI,” said Tajudeen Ibrahim, head of research at Cardinal Stone Partners Ltd, by e-mail.
“The MPC will likely pay more attention to the monthly inflation than the year-on-year increase in the CPI,” he added.
Year-on-Year inflation rose 0.24 percentage points to 17.9 percent in September, from 17.6 in August, while month-on-month inflation slowed to 0.8 percent from 1.0 percent in August, according to a report released Friday by the National Bureau of Statistics (NBS).
“The decline in month-on-month inflation contributed significantly in subduing headline inflation and it is the slowest increase this year,” said Tiffany Odugwe, head of research at Cardinal Stone Partners Ltd, “if it didn’t dip significantly, inflation may have rose to 18 percent.”
Asked whether the new inflation report may alter things ahead of this week’s bond auction, Odugwe said “inflation had already been priced in.
“The traders I spoke with say what would shape the auction is the supply side, given the aggressive mop up by the CBN,” Odugwe added.
The rise from 17.4 percent in August reflected higher prices for electricity, kerosene, transport and food, a separate index which rose to 16.6 percent from August’s 16.4 percent, the NBS said on Friday.
Bismark Rewane, CEO of Financial Derivatives Company, had forecast inflation to rise to 17.9 percent year-on-year in September, while cooling to 12.5 percent on an annualised basis from 12.8 percent in August.