Business Hilights
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Endless killings across Northern food producing states aiding inflation—Cordros

Cordros Capital Group forecast has given fresh angle to the latest headline inflation in Nigeria which rose by 2bps to 10.40% y/y in May.
In its report made available to Business Hilights weekend, Cordros Capital noted that “While the core basket sustained its descent to 9.0% (-25 bps), food inflation (+9bps to 13.79% y/y) jumped to the highest level since April 2018, thanks to a 28bps y/y expansion in farm produce which masked the gain in processed food (+28bps)”.
“From a month ago, headline inflation was 17 bps higher, driven by price pressures in core (+5bps m/m) and food (+27bps). “The increase in m/m food inflation was unsurprising as the negative impact of Ramadan season, which combined with communal clashes in the North, stoked food price pressure in the period. In June, despite the still pressured food prices, we expect the impact of the high base from last year to midwife a moderation in headline inflation. The forecast foresees headline inflation trajectory rising to 11.12% y/y in June.
Within the week in review, Cordros Capital noted that after tapping from the Eurobond waters since 2017, raising a total of c. USD5.5 billion, the federal government has ruled out raising another Eurobond this year.
This is as th Debt Management Office (DMO) has expressed its intention of seeking concessionary and long-term foreign debt to plug the deficit gap caused by the planned to finance 50% (USD2.7 billion) budget deficit in the 2019 financial year, using foreign currency denominated debt.
However, analysts at Cordros Capital say “whereas this is a laudable plan, especially in the light of growing debt service costs, we are weary of the feasibility of achieving this target”.
“In the absence of a Eurobond issue, and failure to secure an alternative, we see possible resurgence of yield uptick, as the FGN floods the domestic capital market in a bid to implement its budget, the report noted.