July 16, 2019/Cordros Report
After two consecutive months of upticks in inflation, the June Consumer Price Index (CPI) reading as released by the National Bureau of Statistics (NBS), shows that year-on-year headline inflation tapered by 18 bps to 11.22% (Cordros estimate: 11.12%), the lowest reading since July 2018. Dissecting the sub-components on year-on-year basis, we note sustained deceleration in the core segment while the food basket also declined after two consecutive months of increase.
Over the rest of the year, the risks to inflation tilt firmly towards the downside, underpinned by our expectation of a largely stable currency — this has the most significant effect on both food and core indices — amidst (1) relatively elevated crude oil prices, and (2) stable crude production, which will continue to buoy the CBN’s foreign reserves, and in turn, support its interventions across the FX market.
We expect headline inflation to dip further over the next few months, printing 11.19% y/y in July (1.11% m/m) and closing the year at 10.96% y/y (2018: 11.44% y/y).
