Freshly released October inflation report showed that the headline inflation rate rose to 11.61% year-on-year (from 11.24% in September 2019), a sharp increase, and the highest in 17 months.
The northward trend in annual inflation was chiefly due to the sustained increase in annual food inflation. This was despite the gentle downturn in core inflation rate which has remained in single-digit. Specifically, annual food inflation rate jumped to 14.09% in October 2019 from 13.57% in September 2019. Also, monthly food inflation rate climbed m-o-m to 1.33% in the month of October, from 1.30% in the month of September, amid sustained closure of Nigeria’s land borders. On a state-by-state basis, October food inflation rate rose to 17.53% (from 15.80%), 17.00% (from 16.08%), 17.00% (from 13.85%) and 16.53% (from 15.39%) in Kebbi State, Ogun, Ondo and Lagos States respectively. The imported food index rose by 1.27% m-o-m amid sustained depreciation of the Naira against the USD at the interbank window where two months moving average foreign exchange rate rose m-o-m by 0.04% to N358.09/USD in October 2019.
On the flip side, annual core inflation rate moderated to 8.88% y-o-y in October 2019 from 8.94% in September 2019 as clothing and footwear inflation rate fell marginally to 9.76% from 9.77%; although inflation rate for energy costs and transport rose by 0.20% and 0.10% respectively. Similarly, we saw the core inflation rate fall on a monthly basis to 0.74% (from 0.89% in September).
Outlook: “We expect the rise in annual inflation rate to be sustained in the coming months in 2019 as food prices increase amid border closure and year-end festive season”