Financial analysts have said that the single digit inflation rate being witnessed in the country may persist throughout the year.
FSDH Merchant Bank Limited in a report made available to our correspondent on Wednesday said its revised average inflation rate forecast for 2013 was 8.6 per cent.
The report, however, said, “We anticipate inflation rate for the months of April and May to remain above March level of 8.6 per cent; on account of base effects from last year.
“Rates and yields on fixed income securities may no longer trail inflation rate in the short term on account of other macroeconomic threats to the economy.”
The latest Composite Consumer Price Index for the month of March 2013, released by the National Bureau of Statistics, showed that inflation rate year-on-year in Nigeria dropped to 8.6 per cent in March 2013, from 9.5 per cent and 12 per cent in February 2013 and December 2012, respectively.
The NBS said that the slow rise in the headline index could primarily be attributed to base effects from March of 2012.
It said, “Increase in the y-o-y inflation rate in March was as a result of higher prices across all classes in the food sub-index. The largest contributors of the increase in the food index were bread and cereals, potatoes, yams and other tubers, and vegetables.
“On month-on-month basis, the core index increased by 0.7 per cent in March 2013, from the previous month. However, all classes that contributed to the core index exhibited muted rises, except the alcoholic beverages, tobacco and cola division.”
The fixed income market was tight during the week due to the withdrawal of about N434.05bn from the system via the government securities and foreign exchange market. Consequently, inter-bank rates closed last week higher, compared to the previous week.
The value of naira closed unchanged at the official market, while it depreciated in the inter-bank and parallel markets segment of the foreign exchange market.
The seven-day Nigerian Inter Bank Offered Rate closed the week higher at 14.13 per cent, 138 basis points increase from the previous week’s figure of 12.75 per cent.
The 90-day NIBOR also closed the week higher at 14.88 per cent, 138 basis points increase from the previous week’s figure of 13.50 per cent.
On the market outlook, the analysts predicted stability in the market in the short term.
The report said, “We expect government securities maturity of about N357bn (91 days); N34bn (182 days); N45bn (364 days) to come into the system this week. However, we also expect withdrawals via Open Market Operation activities by the CBN. Hence, we anticipate relative stability in interest rates in the coming weeks.”