By Odunewu Segun
With the naira depreciating significantly in all the forex market segments, and the anticipated level of forex inflow from international investors not coming, analysts have said inflation rate for the month of July may hit 17.35 per cent from the 16.48 per cent recorded in June.
The predicted 17.5 per cent which will be the highest in 11 years is expected to be as a result of increased in the prices of food items and other non-food items occasioned by the depreciation of the naira.
“Our analysis indicates that the value of the naira depreciated at the inter-bank market and the parallel market by 11.89per cent and 6.63per cent respectively in July 2016. Nigeria’s Inflation rate rose for the fifth consecutive time in June to 16.48 per cent reflecting higher costs of goods and services that was triggered by a weaker naira and higher fuel prices,” analysts at First Security Discount House (FSDH) Group stated.
Similarly, analysts at Financial Derivatives Company Limited (FDC), said factors driving inflation include the lower than expected supply of forex, a weaker naira and sporadic supply shortages in the energy market.
The National Bureau of Statistics (NBS) is expected to release the inflation rate for the month of July 2016 on August 18, 2016 based on the data calendar on its website.
Since the commencement of the flexible foreign exchange policy of the Central Bank of Nigeria, the value of the naira have fallen to N350 from N197 at which it was pegged for 16 months.
With the shortfall in supply, the market priced in the new uncertainty driving the parallel market rate to a low of N400 before stabilising at N395. The average exchange rate in the interbank market depreciated by 28 per cent in July from June’s average of N232.85 to the dollar.
This had affected the prices of goods and services in an import dependent country which spiraled upwards.
The naira lost N38.19 and N25.00 at the inter-bank and parallel market to close at US$/ N321.16 and US$377 respectively as at the end of July. The depreciation recorded in the exchange rate between the two months would put further pressure on domestic prices.”
The naira plunged to N404 against the dollar on the parallel market last Friday. It also closed marginally lower on the official interbank market, ending at N311 per dollar, 0.3 per cent weaker than the previous day’s close.