Headline Inflation Climbs to 12.13% …as Food Prices Continues to Surprise to the Upside


Headline Inflation crossed the twelve-percentage mark for the first time since April 2018. Though within our range expectation, the January 2020 reading surprised to the upside. The Headline CPI rose YoY to 12.13% from 11.98% in December 2019. MoM, the index increased at a faster pace to 0.87% from 0.85% in December 2019. Decomposing the Headline CPI, Food inflation climbed YoY to 14.85% from 14.67% in December 2019, while MoM, the sub-index rose to 0.99% from 0.97% in December 2019. Similarly, the Core inflation increased YoY to 9.35% from 9.33% in December 2019 and rose MoM to 0.82% from 0.81% in December 2019.


Headline inflation advanced by 15bps from 11.98% to 12.13% in January 2020 due to the increases’

recorded in all composites of the consumer price index (CPI). Though the composites vary in their weighting and contributions, the Food sub-index which contribute c.50% to the index rose YoY by

18bps from 14.58% to 14.85% in January 2020. Though the MoM increase was mute, we attribute the continued pressure in food prices not just to the sustained land border closure alone but also the weak transportation system which has continued to exact upward price pressures on transportation. Also contributing to the increase was the interplay of demand and supply, as Nigeria is yet to attain self-sufficiency in food production.

Elsewhere, the Core sub-index increased YoY by 2bps from 9.33% to 9.35% in January 2020 primarily driven by increases recorded across composites of the sub-indices notably; the housing water, electricity, gas and other fuel sub-index as well as the clothing and footwear sub-index. The housing water, electricity, gas and other fuel sub-index, which weighs c.17% of the total index increased by 8bps from 7.70% to 7.78% in January 2020. We believe that the price increase in the sub-index was due to the relative improvement in power supply in the month of January, which came with arbitrary increases in estimated billings for unmetered customers. Clothing and footwear

sub-index rose by 17bps YoY from 9.91% to 10.08%, which we believe explains partly the disruption in the supply side of things for cheap smuggled clothes and footwear occasioned by the sustained land border closure and thus price pressures.


We expect to see the impact of the new VAT increase, which became effective February 1, 2020, in the inflation readings for the coming months. We expect to continue to see price pressures occasioned by system liquidity amid limited viable investment outlets in the CPI. We also believe

that the proposed energy tariffs hike in April 2020 portents a downside to Headline inflation.

Other Highlights:

Food inflation increased year-on-year by 15bps to 14.85% in January 2020 from 14.67% in December 2019. Month-on-month, the index rose to 0.87%, relative to 0.85% recorded in December 2019. The increase recorded in the index was contributed by price increases in bread & cereals; fish; meat; potatoes & other tubers; vegetables; and oil & fats.

Core inflation increased by 2bps year-on-year to 9.35% in January 2020 from 9.33% in December 2019. Month-on-month, the index increased to 0.82%, from 0.81% in December 2019. The major price increases were recorded in Cleaning, Repair and Hire of Clothing; Hairdressing, saloons, and personal grooming establishment; Garment; Vehicle Spare Parts; Glassware, Tableware, and Household Utensils; Shoes and Other Footwear; Repair and Hire of Footwear; Passenger Transport by Air; and Hospital Services.

WSTC Research