JANUARY 2018 INFLATION: DATA REACTION & OUTLOOK

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Nigeria’s Jan-18 Headline Inflation rate eases to 15.1% y/y…

The National Bureau of Statistics (NBS) just released the inflation rate for the month of Jan-18, with Headline inflation moderating to 15.1%y/y (in line with our projection), the twelfth consecutive decline since Jan-17. The Jan-18 number was 24bps lower than the rate recorded in Dec-17 (15.4%). On a month-on-month (m/m) basis, the CPI rose 0.8%, 21bps higher than Dec-17’s 0.6%. The faster moderation in the rate of increase in prices was driven by the food inflation sub-index which eased to 18.9%y/y, from 19.42% recorded in Dec-17. On the other hand, the imported food sub-index increased 15.4%y/y up from 15.1% in Dec-17 while the core inflation index rose 12.1% y/y same as 12.1% recorded in Dec-17.

According to the NBS, the major items responsible for the sustained pressure on the food index albeit at a slower rate were prices of bread and cereals, vegetables, meat, potatoes, yam and other tubers, coffee tea and cocoa, milk cheese and eggs, fish and oils and fats. In the core sub-index, higher prices of Fuel and lubricants for personal transport equipment, vehicle spare parts, accommodation services, maintenance and repair of personal transport equipment, amongst other items, accounted for the increase. For the headline index, the highest increases were observed in the prices of bread & cereals, vegetables, meat, potatoes, yam, & other tubers, coffee, tea & cocoa, amongst other items.

Inflation Outlook

Looking ahead, we project Feb-18 inflation rate decelerate faster to 14.5% or lower if m/m remain below 1%, underpinned by sustained pullback in food inflation, thanks to base effects from 2017. As such, we maintain our view that inflation rate may moderate below 13% before Jun-18, buttressing the argument for a near-term rate cut. However, a renewed pressure on the general price level is likely to be driven by election spending and a possible wage review by H2-18.

 

United Capital Plc Research (UCR)

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