Inflation may hit 34.98 per cent this month, says Cordros

Inflation will hit 34.98 per cent this month, analysts at Cordros Capital analysts have said.

The projection is premised on the base effects from the prior year, the recent hike in electricity tariffs and increased demand, which accompanied the Eid-el-Fitr festivities.

According to the analysts, consumer prices maintained the uptrend, rising by 150 basis points (bps) to 33.2 per cent year-on-year in March “due to exchange rate pass-through on consumer prices, lingering structural challenges impeding food supply, elevated gas and energy prices and unfavorable base effect from the prior year.

“Thus, food prices (+209bps to 40.01 per cent y/y) remained at a 19-year high, while core inflation (+77bps to 25.90 per cent y/y) is at its highest level since March 2004 (32.60 per cent y/y). However, on a month-on-month basis, the headline inflation moderated by 10bps to 3.02 per cent m/m, primarily due to the moderation in food price increases.

“In the near term, we expect the headline inflation to be influenced by the base effects from the prior year, the recent hike in electricity tariffs and increased demand that accompanied the Eid-el-Fitr festivities. Consequently, we now look for a m/m headline inflation of 3.27 in April, translating to a y/y reading of 34.98 per cent.

Meanwhile, a turnover of 1.6 billion shares worth N32.3 billion was recorded in 44,915 deals by investors on the floor of the exchange, up from a total of 1.1 billion units, valued at N28.7 that changed hands in 21,921 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 1.1 billion units valued at N22.4 billion traded in 26,192 deals; thus contributing 71.9 per cent to the total equity turnover respectively.

The conglomerates industry followed with 117.6 million shares worth N1.6 billion in 2,501 deals. The third place was the oil and industry, with a turnover of 92.6 million shares worth N810 million in 2,621 deals.

Trading in the top three equities namely Access Holdings Plc, United Bank for Africa Plc and Zenith Bank Plc (measured by volume) accounted for 570.027 billion shares worth N14 billion in 12,079 deals, contributing 35.7 per cent to the total equity turnover.

Analysts urged investors to rethink trading and investing strategies to stay ahead of the game, in the face of higher interest rates and yields in alternative investment windows, amid mixed economic data and ongoing reform policies of the government.

Also, market players should continue to monitor macroeconomic reports and unfolding activities in the exchange market about how they impact the productivity level of the nation’s economy going forward and the attraction of foreign inflow.

Cordros Capital said: “We anticipate a continuation of bearish sentiments, especially with the likelihood of profit-taking following the recent announcement regarding the suspension of the Dangote Foods merger and ongoing reactions to the recapitalisation exercise in the banking sector.

“In the short-medium term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and corporate actions.”

On the price movement chart, the equities market sustained its bearish trend for the fifth consecutive week, as continued profit-taking activities on tier-one banking stocks drove the market lower.

Subsequently, the NGX All-Share Index and market capitalization depreciated by 2.7 per cent to close the week at 99,539.75 and N56.296 trillion respectively.

The downturn was occasioned by sustained sell pressures on GTCO (-19.1 per cent), Zenith Bank (-11.3 per cent), UBA (-13.7 per cent), FBNH (-10.3 precise) and AccessCorp (-11.9 per cent) resulting in a 2.7 per cent w/w de all-share index, with the month-to-date and year-to-date returns settling at -4.8.per cent and +33.1 per cent, respectively.

On sectors, the banking (-11.5 per cent) index recorded the most significant weekly loss, followed by the insurance (-2.8 per cent), industrial goods (-2.7 per cent) and consumer goods (-1 per cent) indices. The oil and gas index was unchanged.

A total of 31,329 units valued at N5.558 million were traded last week in 167 deals compared with a total of 64,300 units valued at N3.204 million transacted last week in 48 deals.

Also, 126,172 units valued at N124.978 million were traded this week in 28 deals compared with a total of 11,681 units valued at N12.137 million transacted last week in 13 deals.