April 24, 2020/InvestmentOne Report

Please click to download our March 2020 Inflation Update 

·         The Inflation numbers released by the National Bureau of Statistics (NBS) for the month of March 2020 revealed that headline inflation continued its upward trajectory. According to the report, Inflation accelerated to 12.26% y/y in March 2020 from 12.20% in February 2020.

·         As it has been, the food sub index remained the main driver of the uptick in headline inflation increasing by 14.98%y/y, 8bps higher than the level in February 2020..

·         In terms of the Core inflation for March 2020, we witnessed an acceleration in the y/y number by 30bps to 9.73%, On a month-on-month basis, it similarly increased  by 7bps to 0.80%.

·         During the month of March, the FG through the Petroleum Product Pricing Regulatory Agency implemented a reduction in fuel pump price to N125/litre (later N123.50/litre). The reduction in fuel pump price was implemented to reflect the decline in crude oil price in the global market as a result of demand destruction from COVID-19 outbreak.

·         Going into the month of April,  we expect Inflation to sustain its upward trajectory due to a number of factors such as the impact of the lockdown in major cities which may impair farming activities and cause a further hike in food prices; increase in demand for pharmaceutical products and FX challenge on imported products. Similarly, we believe the beginning of the planting season may add to the pressure on food prices in the near term.

·         With the recent outbreak of  the COVID-19 pandemic in Nigeria and its attendant impact on economic activities, we anticipate  heightened inflation numbers as prices of healthcare products and services are currently under pressure. We expect inflationary pressures to also filter into other goods and services. As the nation prepares for a possible nationwide lockdown, we expect prices to increase as consumers try to stock up food items. The interstate lockdown could also constitute problems for transporters of food products (especially rice) as movement between states come is likely to come under restriction. Although there is an exception for the movement of foods and drugs, we think the supply will still not be as usual thereby causing a decline in food available in certain regions in the face of increased demand.