Earlier, the National Bureau of Statistics (NBS) released the inflation figures for Nov-2020. Notably, the headline inflation rate rose from 14.23% y/y in Oct-2020 to 14.89% y/y – marginally ahead of our estimate of 14.78% and the highest since Feb-2018. This was driven by a 1.60% m/m jump in general prices (vs. 1.54% m/m in Oct-2020).
Notably, price increases were observed across all components of the index with the cost of food being the major driver amid domestic supply shortages. On a segmented basis, the food inflation sub-index rose from 17.38% y/y in Oct-2020 to 18.30% y/y in Nov2020. Food prices increased 2.04% m/m (vs. 1.96% in October).
Nigeria Headline Inflation Rate Trajectory
In our view, the pressure from the sustained shortfall in domestic food supply continued closure of land borders, devaluation at the I&E window and increased transportation costs (due to the petrol pump price increase) fueled the increase in food prices during the period.
Elsewhere, the core inflation sub-index dipped to 11.05% y/y (vs. 11.14% y/y in Oct-2020) as m/m pressure reduced sharply to 0.71% (vs. 1.25% in Oct-2020).
Notably, across the components of the core inflation sub-index, the highest increases were recorded in prices of Passenger transport by air, Medical services, and Hospital services.
As the year comes to a close, we reiterate that our outlook for headline inflation remains biased to the upside. Notably, pressures on the food inflation subindex are likely to continue in December due to festivities-related demand and supply shortages amid lingering insecurity, structural bottlenecks, and currency market volatilities.
Overall, we project the m/m inflation rate for Dec-2020 to come in at 1.35% with the headline rate climbing to 15.45%.