From the recent data released by the National Bureau of Statistics (NBS) for April 2020, headline Inflation grew to 12.34% from 12.26% in March 2020. Month-on-Month (MoM), the index rose to 1.02% from 0.84% in March 2020.
Decomposing the CPI, the food index increased YoY to 15.03% from 14.98% in March 2020. While MoM, it climbed to 1.18% from 0.94% in March 2020.
Similarly, the core index advanced YoY to 9.98% from 9.73% in March 2020 and MoM, grew to 0.93% from 0.80% in March 2020. Twelve months average headline inflation stood at 11.71%.
Headline inflation is measured as the Year – on – Year (YoY) percentage change in the All – items Consumer Price Index (CPI).
Analysis
Headline inflation rose YoY by 8bps to 12.34% in April 2020 informed by the increase in food and core indices. The food index increased YoY by 5bps and MoM by 24bps to 15.03% and 1.18%, respectively. We believe that the steeper increase in MoM food inflation was due to the spike in transportation cost as a result of the lockdown as well as the restrictive policies on interstate movement. While we believe that demand has relatively weakened following the interruption in economic activities, we think that the disruption in the supply chain also fuelled the inflationary pressure partly.
Elsewhere, core inflation rose YoY by 25bps and MoM by 12bps to 9.98% and 0.93%, respectively. We believe that the significant driver for the steeper YoY increase was due to the foreign exchange adjustment by the CBN in March 2020. Also, we think that the ample system liquidity contributed to the rise in the index.
Expectation
We maintain our expectation of an uptrend in inflation in the coming months. We believe that the Ramadan festival, as well as the advent of the planting season, are inflationary.
Also, given the rebound in crude oil prices, the possible reversal in the price of premium motor spirits (PMS) portents a downside to inflation.
Other Highlights:
- Food inflation increased year-on-year by 5bps to 15.03% in April 2020 from 14.98% in March 2020. Month-on-month, the index rose to 1.02%, relative to 0.84% recorded in March 2020. The increase recorded in the index were contributed by price increases in bread & cereals; fish; potatoes, yam, and other tubers; vegetables; oil & fats; and fruits.
- Core inflation increased by 25bps year-on-year to 9.98% in April 2020 from 9.73% in March 2020. Month-on-month, the index increased to 0.93%, from 0.80% in March 2020. The major price increases were recorded in bicycles; passenger transport by road; passenger transport by sea and inland waterways; motorcycles; paramedical services; hospital services; pharmaceutical products; medical services; and major household appliances whether electric or not.
WSTC Securities Limited (WSTC)
