May 18, 2021/Cordros Report
The April 2021 inflation report released by the National Bureau of Statistics (NBS) showed that the headline CPI snapped 20 consecutive month of increase, moderating by 5bps to 18.12% y/y (March: 18.17% y/y). The preceding was due to a positive surprise from the food basket amidst the persistently high conflict levels and disruption to trade flows. The outturn was 63bps lower than Cordros’ estimate (18.75% y/y) and 68bps less than Bloomberg’s median consensus estimate (18.80% y/y). On a month-on-month basis, the headline inflation printed 0.97% (March: 1.56% m/m) – the lowest since March 2020 (0.84% m/m).
Ordinarily, the Ramadan period should have led to increased food prices, driven by the rise in food demand. However, we think consumers had anticipated this in March, thereby frontloading food items to meet their April needs. Consequently, demand for food items slowed down in April, leading to a moderation in food inflation by 91bps to 0.99% m/m – the lowest since March 2020 (0.94% m/m). Breakdown provided showed that the moderation in the food inflation was driven by all the sub-categories with the farm produce basket (-100bps) leading the pack, followed closely by processed food (-89bps) and imported food (-2bps) baskets.
Elsewhere, the core inflation moderated by 8bps to 0.99% m/m – the third consecutive month of decline. We believe the preceding reflects (1) fuel price stability at the current level of NGN162.00/litre in line with the Federal Governments deferral of subsidy removal and (2) waning effect of currency depreciation on prices amidst naira stability at the IEW. Accordingly, we note price moderation across the core baskets safe for Communication (+2bps) and Restaurants & hotels (+2bps).
Tying all together, we now look for a 1.08% m/m headline inflation rate, cascading to a y/y print of 18.01%.
