Culled—Proshare
December 31, 2019
by FBNQuest Research
Over the past eight quarters Nigeria’s economy has been on an upward trajectory with regards to GDP growth. However, the growth rate is still below underlying population expansion. Therefore the impact on employment levels or living standards is not significant. Household wallets have not necessarily been re-built. Inflationary pressure has also contributed to subdued spending. Headline inflation has remained at double-digits since February 2016. The headline rate recorded consecutive decreases between May and August, before posting steady upticks.
The food inflation rate has been the primary driver for acceleration in the headline rate. Its latest reading (for November) shows y/y growth of 14.48%. The border closure which took effect in August has fuelled selective price increases, particularly in the food segment.
The transport segment, which accounts for 6.5% of the total inflation basket, shows an inflationary price increase of 0.8% m/m in November (unchanged from the previous month) and 9.2% y/y compared with 9.1% recorded in October. Transportation costs feed into spending patterns for most Nigerians.
The segment categorised as “housing, water, electricity, and gas and other fuels”, the largest component of the core measure, recorded an inflationary price increase of 7.7% y/y in November compared with 7.6% y/y in October. This segment gulps a sizeable portion of monthly expenses across households.
Consumer price inflation, Headline (y/y; % chg)
Sources: NBS; FBNQuest Capital Research
As for education, inflationary price increase was 8.7% y/y in November. This is mirrored in school fees increases across education levels, particularly in private schools.
At its latest meeting, the monetary policy committee noted the recent upticks in inflation were partly due to seasonal end-year festivities but further accentuated by the border closure. The food supply shock should adjust over the medium term, provided there are increased investments in food production.
