April 17, 2023/CSL Research

Headline inflation continued its upward trend in March albeit at a moderate level, increasing to 22.04%, which is 13bps higher than the 21.91% recorded in February. On a month-onmonth basis, headline inflation was up by 15bps to 1.86% in March from 1.71% in February and was up by 612bps compared to the rate recorded in March 2022 which was 15.92%.

Headline inflation numbers were driven by an increase in both food and core inflation. Central Bank of Nigeria (CBN) has maintained a hawkish stance to stem inflation. The CBN hiked its key interest rate to 18% in March, a 650bps rate hike since May 2022 in response to the continued price pressures and a weakening Naira.

Food inflation, a major driver of headline inflation, increased to 24.45% in March from 24.35% in February. On a month-on-month basis, the food basket grew to 2.07% compared to 1.90% in February. According to the Nigerian Bureau of Statistics (NBS), the rise in food inflation was attributed to an increase in prices of oil and fat, bread and cereals, potatoes, yam and other tubers, fish, fruits, meat, vegetables, and spirits.

Core inflation, which excludes the prices of volatile agricultural produce spiked by 102bps to 19.86% in March from 18.84% in February. Month-on-month, the core basket grew by 1.84% in March from 1.06% recorded in February. The highest increases were recorded in the prices of gas, passenger transport by air, liquid fuel, fuels, and lubricants for personal transport equipment, vehicles spare parts, solid fuel, etc. Looking ahead, we expect inflation may start to moderate in the second half of the year, largely due to base effect. Nevertheless, we still expect some price triggers such as a possible elimination of subsidies

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