Some financial experts on Friday expressed optimism that the nation’s inflation figure would continue to slowdown with enhanced stability in the foreign exchange market.
They said this in an interview, in Lagos, while reacting to March inflation figure.
The experts said that the inflation figure would continue to witness downward trend with continuous improvement in the nation’s exchange rate.
A Professor of Economics, Olabisi Onabanjo University, Ago-Iwoye, Prof. Sheriffadeen Tella, said that downward trend in inflation rate would continue as long as exchange rate continue to improve.
Tella stated that current inflation was fueled by exchange rate variability in the foreign exchange market.
He added that the country’s import dependent economy contributed to the rise in inflation with many sourcing for foreign exchange at any means to import goods and raw materials.
Tella said that the figure would continue to drop if the Central Bank of Nigeria (CBN) was able to reduce foreign exchange differential in the country.
Head of Banking and Finance Department, Nasarawa State University, Keffi, Dr Uche Uwaleke, said the drop in headline inflation from 17.78 per cent in Feb. to 17.26 per cent in March was a welcome development.
Uwaleke said that the apex bank’s sustained intervention in the forex market was moderating inflationary pressure from pass-through effect of high exchange rates.
“Given the import-dependent nature of the economy, it came as no surprise that the appreciation of the Naira in recent times on the back of CBN’s sustained interventions in the forex market is moderating inflationary pressure from pass-through effect of high exchange rates.
“It was also expected that the high food and non-food prices recorded in the corresponding period of 2016 provided a base effect on the inflation rate for March 2017,’’ he stated.
Uwaleke, however, stated that the key driving factors of inflation such as electricity, fuel, housing and transportation services challenges were still visible.
He said that these challenges were fundamentally structural and would take some time to address.
Uwaleke added that the inflation rate would trend further downwards in the wake of favourable developments in the international oil market in the coming months.
“In the absence of any serious shock to the economy either from oil price or output, I am optimistic that the inflation target of 15.74 per cent as contained in the 2017 budget proposal will be met,’’ Uwaleke said.
The National Bureau of Statistics (NBS) said on April 14 that inflation figure dropped to 17.26 per cent in March from 17. 78 per cent in February.
The NBS said the second consecutive month of a decline in the headline rate represented “the effects of stabilising prices in already high food and non-food prices’’.
“It is also indicative of early effects of a strengthened Naira in the foreign exchange rate market,’’ said NBS report.