January 17, 2023/Cordros Report
Consumer prices eased for the first time since January 2022, primarily supported by the high statistical base effect from the corresponding period in the previous year. According to the National Bureau of Statistics (NBS), Nigeria’s headline inflation eased by 12bps to 21.34% y/y in December 2022 (November: 21.47% y/y). Thus, headline inflation averaged 18.77% y/y in 2022FY (2021FY: 16.98% y/y) – the highest annual print since 2001FY (18.90% y/y). Parsing through the breakdown provided, we highlight that food prices (-37bps to 23.75% y/y) moderated after nine consecutive months of increase while the core inflation (+25bps to 18.49% y/y) rose to its highest level since January 2007 (19.34% y/y). The reading is 36bps above Cordros’ estimate (20.98% y/y) and 46bps lower than Bloomberg’s median consensus estimate (21.80% y/y). On a month-on-month basis, headline inflation increased by 32bps to 1.71% (November: 1.39% m/m).
In December 2022, food inflation rose by 49bps to 1.89% m/m (November: 1.40% m/m) – its highest print in five months. Unsurprisingly, the pressures on food prices reflect the trifecta effects of the (1) festive season-induced demand, (2) lingering impact of the transport cost on food prices, and (3) low food supply exacerbated by the below-average harvest season. Consequently, price increases across the Farm produce (2.01% m/m vs November: 1.18% m/m) and Processed food (1.85% m/m vs November: 1.46% m/m) sub-baskets were sufficient to offset the slowdown in the imported food (1.47% m/m vs November: 1.49% m/m) sub-basket. Conversely, on a year-on-year basis, food inflation moderated by 37bps to 23.75% y/y (November: 24.13% y/y), mainly driven by the favourable base effects from the prior year. In line with the preceding, the breakdown provided shows that prices tapered across the Farm produce (-45bps to 23.62% y/y) and Processed food (-35bps to 23.79% y/y) sub-baskets.
Meanwhile, the core inflation reversed last month’s uptrend, moderating by 34bps to 1.33% m/m. We are unclear on the main drivers of this slowdown, given that prices increased across all the core inflation sub-baskets amid the intermittent PMS scarcity, lingering impact of high energy prices, and increased spending in line with the festive period. Notably, price pressures were most significant across the Resturants & Hotels (+19bps), Transport (+11bps), Utilities (+7bps), and Recreation (+5bps) sub-baskets. On a year-on-year basis, the core inflation basket continues to tilt upwards, rising for the ninth consecutive month to 18.49% y/y – its highest print in 15 years.
Sequentially, we now look for a m/m headline inflation of 1.45% in January, translating to 21.32% y/y.
Overall, we revise our 2023FY average and year-end inflation base-case projections to 20.08% y/y and 19.71% y/y, respectively.
