February 16, 2023/CSL Research
The Headline inflation rate resumed its upward trend in January surging to a new 17-year high of 21.82% which is 48bps higher than the 21.34% recorded in December 2022. On a Monthon-month, headline inflation remained upbeat, up 16bps to 1.87% in January from 1.71 in December 2022. These numbers were largely driven by disruption in local food supply (caused by widespread insecurity and flooding), high energy cost, imported inflation (triggered by
disruption in global supply chain and Naira depreciation), and increase in the cost of production which is passed on to end consumers.
Food inflation increased to 24.32% in January from 23.75% in December 2022. On a monthon-month basis, the food basket grew higher by 2.08% compared to 1.89% in November and 1.40% in October. According to the Nigerian Bureau of Statistics (NBS), the increase was attributed to an increase in the prices of some food items like bread & cereals, fish, oil and fat, potatoes & tubers, and fruits, etc. However, we believe the increase in food prices could
be attributed to the pass-through effect of the increase in logistics and haulage cost as the country continues to grapple with persistent petrol scarcity and heightened insecurity.
Core inflation was up 25bps to 19.16% in January from 18.49% in December. Month-onmonth, the core basket grew by 1.82% in January from 1.33% recorded in December and 1.67% in November. The highest increases were recorded in prices of gas, liquid fuel, passenger transport by air, vehicles spare parts, fuels and, lubricants for personal transport equipment, solid fuel, etc. Looking ahead, despite the aggressive monetary policy approach by the CBN to curtail spiking inflation numbers, we expect the upward trend in the headline inflation to persist albeit at a moderate level, as the country’s inflation numbers remain supply driven. Also, we envisage that increased election spending will influence February inflation numbers as we fast approach the 2023 general elections.
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