Freshly released Consumer Price Index (CPI) data by the National Bureau of Statistics (NBS) showed that the annual inflation rate maintained its northward trend, as it further climbed to 14.23% in the month of October (from 13.71% printed in September).
The rise in inflation rate was chiefly due to an increase in Food inflation rate to 17.38% in October (from 16.66% recorded in September).
We believe that 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 and the “End SARS” protest. Also, core inflation rate spiked to 11.14% (from 10.58% in September) amid rising in transport (transport fare surged on higher fuel price), clothing and footwear as well as housing water and electricity amongst others.
The imported food index rose to 16.50% (higher than 16.44% in September) given the depreciation of the Naira against the USD at most market segments. We noticed that monthly average foreign exchange rates at the BDC and Parallel market rose m-o-m by 2.07% and 1.17% to N455.65/USD and N461.45/USD respectively in October 2020.
On a monthly basis, headline inflation rose to 1.54% in October (from 1.48% in September). Also, monthly food inflation rose to 1.96% in October (from 1.88% in September) while Core inflation rose to 1.25% (from 0.94% in September) given the rise in clothing and footwear (+1.05%), transportation costs (+1.19%) as well as housing and energy costs (+0.84%).
Meanwhile, urban and rural inflation rates rose to 14.81% and 13.68% (higher than 14.31% and 13.14%) respectively.
We expect inflation to remain elevated in 2020 amid anticipated rise in food prices, the recent increase in the price of petrol motor spirit and the fast-approaching festive season.