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Nigeria Inflation continues uptrend for the ninth consecutive month to 21.09%

According to the National Bureau of Statistics (NBS), consumer prices maintained their uptrend for the ninth consecutive month, notching higher by 31bps to 21.09% y/y as existing challenges remain intact coupled with the impact of base effects from the prior year.

Decomposing the breakdown provided, we highlight that food prices (+39bps to 23.72% y/y) remain at a 17-year high while the core inflation advanced further by 16bps to 17.76% y/y. The outturn is 22bps below Cordros’ estimate (21.31% y/y) and 21bps lower than Bloomberg’s median consensus estimate (21.30% y/y). However, on a month-on-month basis, headline inflation moderated by 11bps to 1.24% – tracking lower than the 10M-22 average (1.64% m/m).

Food inflation eased by 21bps to 1.23% m/m in October (September: 1.43% m/m). Notwithstanding, we highlight that the reading is above prior October food inflation readings (12-year average: 0.90% m/m), underscoring the impact of the reported flooding incidents on the primary harvest season. Indeed, Famine Early Warning Systems Network (FEWSNET) also noted that flooding has led to crop losses, especially in riverine areas and along flood plains. Accordingly, prices of Farm produce snapped the previous month’s downtrend, increasing by 30bps to 1.48% m/m in October. Elsewhere, currency pressures and high global food prices continue to stoke Imported food prices (+4bps to 1.44% m/m) while the Processed food (-35bps to 1.15% m/m) basket eased to its lowest level since November 2021 (1.11% m/m). However, on a year-on-year basis, food prices rose further by 39bps to 23.72% y/y (September: 23.34% y/y), primarily due to the impact of the unfavourable base effects from the prior year amid the lingering structural challenges impeding food production and supply. Consequently, there was a noticeable increase across the Farm produce (+43bps to 23.77% y/y), Processed food (+38bps to 23.71% y/y), and Imported food (+9bps to 18.09% y/y) sub-baskets.

Elsewhere, the core inflation eased by 66bps to 0.93% m/m, given slower increases in the Transport (-8bps to 1.47% m/m), recreation & culture (-3bps to 1.34% m/m) and Restaurants & hotel (-20bps to 1.28% m/m) sub-baskets. On a year-on-year basis, the core inflation increased by 16bps to 17.76% y/y. Asides from the low base effect from the prior year, the price pressures synchronised neatly with the (1) intermittent PMS scarcity witnessed during the review period, (2) stubbornly high gas and energy prices, (3) lingering currency pressures, and (4) build-up of higher naira liquidity as the campaign season starts.

Overall, we now look for a m/m headline inflation of 1.31% in November and 1.34% in December, translating to y/y readings of 21.37% y/y and 20.79% y/y, respectively.

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