Last week, the National Bureau of Statistics released March inflation figures which showed that inflation dropped from 17.78% in February to 17.26% in March.

Nigerians expected that with the decrease in inflation, there would have been a fall in food prices. Food prices rose by 2.21% — 22 points higher than in February – with notable increases in the prices of bread, cereals, milk, meat, fish, potatoes, cheese, and eggs.

What could be responsible?

1. Base Year Effect: The Base Effect relates to inflation in the corresponding period of the previous year. For instance, if the inflation rate was too low in March 2016, even a smaller rise in the Price Index in March 2017, will arithmetically give a high rate of inflation.

According to analysts at the Financial Derivatives Company, FDC, the year-on-year figures show a decline in both core and food inflation, despite an increase in monthly inflation with the Base year effects remaining a major contributing factor to the slowing inflationary pace.

2. Skepticism About CBN’S Actions: The Central Bank of Nigeria, CBN has been swaying the foreign exchange market in different direction to prop up the value of the Naira. This is why FDC analysts also noted that the effects of the CBN’s forex intervention have not yet been positively felt as manufacturers ‘await more clarity and sustainability in the market.’

This means many are still skeptical about how long the CBN can continue supporting the Naira. Sustained intervention may however instill belief in manufacturers and result in increased production.

3. Stocks On Hand Need To Be Disposed: According to Nairametrics, most manufacturers still have stocks that they purchased at higher prices. They still want to sell these off at a profit before restocking at lower prices, which will then reflect lower rates.

4. Harvest Time Is Not Yet Here: This reason was given by the Chairman of the Nigerian Economic Summit Group (NESG), Mr. Kyari Bukar. Nairametrics quotes Bukar as saying that most harvests will happen during the months of April and May.

As a result, the effects of the FG’s efforts may not be evident until then.

“We are seeing improvements and some government efforts are bearing fruits. I don’t think the impact of agriculture has as it will, until the second quarter, because most of the harvest happen around the April/May time frame.”