November 21, 2018/Cordros Report
Nigeria’s consumer prices index moderated in October – after two consecutive months of increases in August and September – to 11.26% y/y, as significant gains from food inflation largely offset slight expansion in the core basket. Annual core inflation bucked an 11-months old deceleration in October (+1bps to 9.9% y/y), largely underpinned by price pressures across energy, Housing, Water, Gas, Electricity & other fuels (HWEGF) divisions. Elsewhere, gains from harvest season largely exert downward pressure on food prices, even as the scale of moderation was capped by renewed pressures on processed food. Accordingly, annual food inflation moderated by 3bps to 13.28%.
With the conclusion of the main harvest season, we now expect headline inflation to resume uptrend, underpinned by uptick in food inflation, although we expect the rate of increase will be capped by deceleration in the core basket.we now look for m/m headline inflation reading of 0.79% in November and 0.73% in December, translating to y/y readings of 11.27% y/y and 11.42% y/y (sharp increase reflecting the low base of 2017) respectively.
With the deceleration in October inflation expected to come as respite to the MPC, we look to developments in the currency market dominating deliberations in this week’s meeting. Nonetheless, we look to the MPC leaving the main policy rate unchanged with a strong likelihood of a CRR hike.