December Inflation Rate Jumps to 15.75% amid Persistent Surge in the Food Index…

TRADERS VOICE cooking gas Inflation

The National Bureau of Statistics (NBS) reported that the headline Inflation rate sustained its uptrend for the 16th consecutive month to 15.75% in December 2020 (from 14.89% printed in November).

The increase in the inflation rate was caused by continuing pressure on the food and non-food index. Food inflation jumped to 19.56%(from 18.30% in November) driven by higher prices due to the festivities and higher logistics cost; albeit, the partial re-opening of the land borders in December should have helped in easing the inflationary pressures for December.

Nigeria's Inflation sustains sprint, rises to 14.89% y/y in November 2020

Imported food index also upped by 16.64% (higher than 16.54% in November) amid depreciation of the Naira – specifically, two months moving average foreign exchange rates at the BDC and Parallel market rose y-o-y by 1.44% and 1.54% to N468.45/USD and N475.43/USD respectively in December 2020.

Similarly, the core inflation rate climbed to 11.37% (from 11.05% in November) caused by an increase in passenger transport in air, medical services, hospital services, pharmaceutical products amid others.

On a monthly basis, headline inflation rose to 1.61% in December (from 1.60% in November).

Notably, monthly food inflation rose to 2.05% in December (from 2.04% in November) as prices of bread, cereals, potatoes, yam and meats, amongst others, increased while Core inflation rate increased to 1.10% (from 0.71% in November) amid higher clothing and footwear (+0.28%), transportation costs (+0.47%) as well as housing and energy costs (+0.36%).

Meanwhile, urban and rural inflation rates rose to 16.33% and 15.20% (higher than 15.47% and 14.33%) respectively.

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We expect inflation to be exacerbated amid higher pump price, given the rise in crude oil prices and expected upward adjustment in electricity tariff in 2021. Howbeit, we expect to see a positive effect of the border reopening on the food index as it provides some level of counterweight.