Yesterday, the National Bureau of Statistics (NBS) released inflation data for the month of November which showed that headline inflation in Nigeria rose for the fifteenth consecutive month to a 34-month high of 14.89% in November from 14.23% in October. On a m/m basis, the headline inflation index increased by 1.60% in November, 0.06ppt higher than October’s 1.54%.
The food sub-index rose strongly to 18.30% in November, 0.92ppt higher than October’s 17.38 while it rose by 2.04% on a m/m basis (0.08ppt higher than October’s 1.96%). FX liquidity constraints, the impact of the border closure, poor farm yields since the start of the harvest season due to incidences of flooding in major food-producing areas are all factors that continue to constrain food supply and impact food prices. Added to this, the high rate of insecurity especially in the food region has further contributed to the low food supply as many farmers are afraid of going to their farms, hence resulting in scarcity. Recently, there were reports that armed men on motorcycles led a brutal attack on civilian men and women who were harvesting their fields and at least 43 persons were killed and others kidnapped.
The core sub-index on the other hand fell to 11.05% (0.09ppt lower than October’s 11.14%). On a m/m basis, the core sub-index rose by 0.71% in November ( 1.25% in October). The biggest increases in the core sub-index basket were recorded in prices of passenger transport by air, hospital & medical services, furniture repairs, pharmaceutical products, passenger transport by road, repairs & maintenance of personal transport equipment, vehicle spare parts, etc. While the increase in health-related expenses remains reflective of the Covid-19 pressures, we believe the increase in cost of transport by road is linked to the recent spike in petrol prices and the increase in transport costs by air has been largely affected by the significant rise in flight tickets.
Looking ahead, we expect food inflation to maintain an upward trend considering expectations of increased demand during the Christmas festivities amidst low food supply. In the same vein, increased electricity tariffs (the implementation of the new tariffs that was briefly suspended has been re-introduced) will also contribute to inflationary pressures.
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