February 28, 2022/Proshare
by FBNQuest Research
Today, we return to our commentary on inflation. January’s headline figure showed a slight slowdown to 15.60% y/y, from 15.63% in December ’21. Except for an out-of-trend increase in December’s reading which we attributed to price upticks associated with the year-end holiday season, base effects have remained positive. Inflationary pressures, however, continue to squeeze consumers’ pockets.
Food inflation, the greatest driver of the elevated headline reading, slowed to 17.13% y/y last month and was driven by increases in bread and cereals, potatoes, yam and other tubers, soft drinks, oils and fats, fruits and food products not elsewhere classified.
In the selected food price watch report for January, a separate report by the National Bureau of Statistics (NBS), we see that all 43 food items surveyed recorded y/y price increases averaging 26.1%. Local food production has been a priority for the government as it aims to “achieve self-sufficiency, attract investments, create jobs and enhance the livelihood of farming families”. Insecurity remains the single biggest limitation of the government’s investment into the agriculture sector.
Imported food inflation recorded a 6bp increase to 17.4% last month, reflecting importers’ persistent challenge with fx availability.
The Premium Motor Spirit (PMS) price watch shows that the average price paid by consumers for PMS increased by 1.4% y/y and by 0.4% m/m to NGN166.40 per litre in January from NGN164.09 in the previous month. Abia, Kebbi and Cross River recorded the highest average prices in the month, while Borno, Adamawa and Lagos posted the lowest average PMS prices.
The importation of petrol with high methanol content in recent weeks prompted an investigation by the House of Representatives Committee on Petroleum Resources (downstream), following a resolution of the House. This led to short supply of PMS and a resultant hike in its price to as high as NGN600 per litre in some states. The NNPC has disclosed plans to restore supply by boosting incoming PMS supplies, recertifying and releasing in-country PMS stock and enhancing distribution management.
The transportation segment, which accounts for 6.5% of the basket, again posted a price increase of 15.1% y/y and 1.3% m/m last month. The NBS’s transport fare watch shows that the increase in the average fare paid by commuters for bus journeys within cities rose by 1.2% m/m and 35.3% y/y on average in January.
The NBS report on Liquefied Petroleum Gas (LPG) prices also reveals that the average cost of refilling a 12.5kg cylinder rose by 1.1% m/m and by 77.5% y/y to an average of NGN7,413 in January ’22, from NGN7,332 in December.
At its meeting last month, the MPC voted unanimously to hold all policy parameters constant. The committee believed that its current pro-growth approach is desirable because unlike industrialized countries that are primarily concerned with inflation, Nigeria is confronted with the dual issues of inflation and output growth.
