Yesterday, the National Bureau of Statistics (NBS) released inflation data for the month of September which showed that headline inflation in Nigeria rose for the thirteenth consecutive month to a 30-month high of 13.71% in September compared with 13.22% in August. On a m/m basis, the headline inflation index increased by 1.48% in, 0.14ppt higher than August’s 1.34%. The pressure on headline inflation in July was broad based as increases
were recorded across both the food sub-index and core sub-index.
In September 2020, the food sub-index was up 16.66% (0.66ppt higher than September’s 16.00%) while it rose by 1.88% on a m/m basis (0.21ppt higher than August’s 1.67%). In our last inflation note, we highlighted how abnormal rainfall patterns, reduced farming activities in the lockdown months and sustained farmers/herdsmen clashes have hampered farm output since the beginning of the harvest season. We believe, the poor harvests which
directly impacts the supply side of the food market negatively amidst a recent scarcity of grains impacted prices negatively in September. Unsurprisingly, the COICOP baskets that recorded the highest increases were oil and fats, fish, potatoes, yams & other tubers, meat, bread & cereals and fruits.
In addition, the core sub-index rose by 10.58% (0.06ppt higher than August’s 10.52%). On a m/m basis, core sub-index rose by 0.94% in September (1.05% in August). According to the inflation report, the biggest increases in the core sub-index basket were recorded in; passenger transport by air, pharmaceutical products, hospital services and passenger transport by road. We think the increase in the pharmaceutical products, hospital & medical services is reflective of covid-19 induced pressures and imported inflation pressures on medical equipments. That said, we highlight that the core sub-index grew at a slower pace despite the impact of higher electricity tariffs and fuel costs in September.
Looking ahead, we expect inflationary pressures to persist. Though we are entering the main harvest months of the farming season, we expect harvests to remain disappointing due to earlier mentioned factors. Thus, we think inflationary pressures will be largely food driven. The Federal Government has agreed to subsidise electricity tariffs for the next 3 months, so we expect this to stem pressures on the core sub-index.
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