In its latest report, the National Bureau of Statistics put Nigeria’s January headline inflation at 12.6%, up by 230bps from10.3% in December 2011. In the same vein, Food Inflation rose to 13.1% year-on-year, from 11.0% in December 2011. The report also indicates that core inflation (measured by All Items Less Farm Produce Index) rose to 12.7%, versus 10.8% in the previous month.
The elevated level of inflation is expected to narrow the positive real return that has partially triggered asset reallocation away from equities with sustained incentive to hold Naira positions. However, we believe higher inflation is likely further out, as this spike comes from a relatively low base. Hence, we expect a moderation in the movement of prices in the near term even as early rainfall tempers the rise in food prices for most part of 2012. Nonetheless, we expect the headline inflation to remain in double digits through 2012, fuelled by consistently unfavourable supply-push factors.
Source: Afrinvest
