November 17, 2020/Cordros Report
Nigeria’s headline inflation notched higher in October to 14.23% y/y, relative to 13.71% y/y in the prior month. This was in line with our expectation of higher month-on-month reading, stemming from limited bountiful food harvest, and lingering effect of border closure and currency depreciation – see report: No Respite in Sight for Food Prices. On a month-on-month basis, headline inflation increased by 6bps to 1.54% – tracking significantly above the 2020 average of 1.15%. The outturn is 2bps higher than Cordros’ estimate (14.21% y/y), with the deviation stemming from core inflation, and 13bps higher than Bloomberg median consensus estimate (14.10% y/y).
Food prices firmed up in the review period by 72bps to 17.38% y/y, following price increases in farm produce (+48bps to 16.97% y/y), processed food (+79 bps to 17.50% y/y), and imported food (+6bps to 16.50% y/y). We expected the food prices to continue its acceleration in the review period on the back of a below-average harvest influenced by flood incidence on farmlands, disruptions along the supply chain, and the lingering impact of the border closure which meant no augmentation to limited local food supplies. Famine Early Warning Systems Network (FEWSNET) also reported flooding in Jigawa, Niger, Kebbi, Kwara, Zamfara and Sokoto states as of early October. Accordingly, prices of maize, sorghum, millet, and rice, remain significantly above average across most parts of the country.
After the moderation in the prior month, core inflation resumed its accent, advancing by 31bps to 1.25% m/m. Sifting through the breakdown provided, the increase in the core basket emanated from price pressures across all the components of the core index with most pressure felt in the processed food (+14bps), HWEGF (+3bps), and health (+3bps) inflation – all of which account for 42.4% of the core basket. We further highlight that the HWEGF (0.83% m/m), health (1.25% m/m), and transport (1.19% m/m) prices extended their uptrend to the fifth consecutive month. On a year-on-year basis, core inflation increased by 56bps to 11.14% y/y – the highest since March 2018 (11.18% y/y).
For the rest of the year, we expect the pressure on consumer prices to be maintained. We now look for m/m headline inflation reading of 1.67% in November and 1.68% in December, translating to y/y readings of 14.95% and 15.89% y/y, respectively.
