Freshly released Consumer Price Index (CPI) data by the National Bureau of Statistics (NBS) showed that the annual inflation rate maintained its upward trajectory, as it further rose to 13.71% in the month of September (from 13.22% printed in August). The northward movement in inflation rate was chiefly due to a jump in Food inflation rate to 16.66% in September (from the 16% printed in August).
We believe the spike in food inflation was due to the weak harvest season induced by low planting activity given the restrictions on movements amid Covid-19 pandemic. Also, the core inflation rate climbed to 10.58% (from 10.52% in August) amid rising in transport, clothing and footwear as well as housing water and electricity amongst others.
The imported food index rose to 16.44% (higher than 16.42% in August) despite the appreciation of the Naira against the USD at most market segments. Specifically, two months moving average foreign exchange rates at the BDC and Parallel market moderated y-o-y by 1.55% and 1.22% to N457.99/USD and N465.73/USD respectively in Septemeber 2020. Albeit, the interbank market rate depreciated by 0.56% to N381.00/USD.
On a monthly basis, headline inflation rose to 1.48% in September (from 1.34% in August). Notably, monthly food inflation rose to 1.88% in September (from 1.67% in August) as prices of bread, cereals, potatoes, yam and meats, amongst others, increased.
However, Core inflation fell to 0.94% (from 1.05% in August) despite higher clothing and footwear (+1.00%), transportation costs (+1.16%) as well as housing and energy costs (+0.80%). Meanwhile, urban and rural inflation rates rose to 14.31% and 13.14% (higher than 13.83% and 12.65%) respectively.
Outlook:
We expect inflation to remain elevated in October 2020 amid an anticipated rise in food prices given the ongoing rainy season. Also, as the festive season approaches, we expect to see a general rise in the price level.
Cowry Research
