The National Bureau of Statistics (NBS) today released Nigeria’s inflation report for the month of Nov-18. Much in line with the Bloomberg consensus estimate, the headline inflation rate rose marginally to 11.28% y/y. The Nov-18 number was 2bps higher than the rate recorded in Oct-18 (11.26% y/y). On a month-on-month (m/m) basis, the headline CPI increased by 0.80% in Oct-18, 6bps higher than the rate recorded in Oct-18. The slight uptick in the headline rate was driven by the Food Inflation sub-index which rose by 2bps relative to the prior month to 13.30% y/y, outweighing the deeper decline in Core Inflation (down by 10bps to 9.8%y/y).
Notably, the slight pressure on the food inflation sub-index can be attributed to rising demands for Agric. products in the run-up to December festivity, offsetting the improvement in the supply of agricultural produce in the run-up to the month in view as cases of farmland flooding waned. On the other hand, the slowdown in the y/y core inflation subindex can be attributed to continued stability prices in the other components of the subindex except for energy prices which remained largely volatile during the month.
Looking ahead, we expect the pressure on food inflation sub-index to be sustained into Dec -18, albeit marginally, as we anticipate increases in the supply of food items during the month to be outweighed by demand, especially as we move deeper into the festive season. Thus, we expect m/m food inflation to rise slightly by 0.95% in Dec-18. Elsewhere, campaign-related spending and the likelihood of a sustained volatility in the currency market remains the major downside risk to core inflation. In line with this, we expect the m/m core inflation sub-index to track marginally higher to 0.70% in Dec-18. On a balance of these factors, we expect m/m headline inflation to average 0.83% pressuring y/y inflation sharply higher to 11.55% in Dec-18.