April 19, 2022/Coronation Economic Flash Note

The NBS has released its March inflation report to show –

Headline rate 15.92% y/y (15.70% in February);
Core rate 13.91% y/y (14.01%); and
Food rate 17.20% y/y (17.11%).

• March’s headline reading increased by 21bps (when compared with the previous month) to 15.92% y/y.      
• On a month-on-month basis, headline inflation increased from 1.63% recorded in February to 1.74% in March ’22.   
• Food inflation recorded an increase of 9bps when compared with the previous month. For the food inflation rate (17.20%), the highest increases were recorded in bread, cereals, oils and fats, fish, meats, potatoes, yam, and other tubers.
• On a y/y basis, imported food price inflation increased by 8bps to 17.56% y/y from 17.48% y/y recorded in the previous month.
• Core inflation decreased by 10bps to 13.91% y/y from 14.01% y/y recorded in the previous month. For the core inflation, price pressure was felt across gas, liquid fuel, fuels, and lubricants for personal transport equipment and other services in respect of personal transport equipment, garments, footwear, and clothing materials. Given that the core measure covers all items excluding farm produce, we expected the passthrough effect from price surges across diesel, aviation fuel and electricity to result in a higher m/m uptick.
  
• However, we do note that within the basket, the segment categorized as housing water, electricity, gas and other fuel increased by 12.32%y/y and 1.37% m/m. The transport segment also recorded an increase of 15.37% y/y and 1.49% m/m. These increases can be partly attributed to the fuel scarcity experienced in March, the hike in electricity prices and the uptick in diesel, kerosene, and aviation prices on the back of the trickle-down effect from the Russia-Ukraine crisis.                     
• The NBS tracks headline inflation by state, with Cross River recording the highest (18.42% y/y) and Kwara recording the lowest (14.03% y/y) in March ‘22. It is worth noting that household baskets vary across states due to different consumption patterns.
• The CBN’s in-house estimates suggest that inflation is expected to remain considerably high in the short term, due to the persistence of supply-chain bottlenecks that have been exacerbated due to the Russia-Ukraine crisis.
• The MPC is scheduled to hold its next meeting on the 24th  and 25th of May ‘22.

To read the full report, click here