Nigeria’s Headline Inflation Rate Accelerates To 12.13% Y/Y, As M/M Inflation Edges Upward

Nigeria’s Net FX Inflow Rises to USD6.43 billion in April
REUTERS/Akintunde Akinleye

Earlier, the National Bureau of Statistics (NBS) released inflation figures for Jan-2020. Analyzing the report, the Headline inflation rate maintained an uptrend, increasing to 12.13% y/y, from 11.98% y/y in Dec-2019.

Notably, this is the first time since Apr-2018, that the y/y headline inflation rate has trended above a 12.0% level, dampening the CBN’s dream of a single-digit inflation rate. On a m/m basis, the headline inflation ticked upwards by 0.87%, from 0.85% in Dec-2019. Explaining further, the 12 constituents of the index, including food, clothing, and others, all increased on a m/m basis. This was not far-fetched, as the closure of Nigeria’s borders continued to affect the prices of food and other components of the inflation index.

United Capital Research

On a segmented basis, the Food inflation sub-index increased by 14.85% y/y from 14.67% y/y in Dec-2019. In terms of monthly food inflation, the same trend was observed, rising from 0.97% to 0.99% m/m. We believe the sustained shortfall in domestic food supply relative to demand, following the closure of land borders, fueled the increases in food prices. Elsewhere, the Core inflation index inched higher by 9.35% y/y (vs 9.33% y/y in Dec-2019) and moved up from 0.81% to 0.82% m/m in Dec-2019. Notably, across the components of the Core inflation sub-index, the highest increases were recorded in Clothing and Health Services. Meanwhile, Energy prices increased marginally, owning to continued stability in FX rates and capped PMS prices.

Inflation Outlook

Looking ahead, we expect the headline inflation rate to remain pressured in Feb2020, no thanks to the continued closure of the border, implementation of the new N30,000 national minimum wage, upward revision in ValueAdded-Tax (VAT), rising level of financial system liquidity as well as increasing cost of commercial transportation in Lagos amid the ban on tricycles and motorcycles across the state. Further pressure point also lies ahead, as the Nigerian Electricity Regulatory Commission (NERC) has directed the 11 electricity distribution companies (DisCos) to hike their tariffs by an average of 50.0% on April 1, 2020. Factoring all the abovementioned factors, we anticipate y/y inflation to increase from the current 12.13% y/y to 12.32% in Feb-2020, while m/m inflation will rise from 0.87% to 0.90%.