July 18, 2023/InvestmentOne Report
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- Steady rise in inflation continues as reported by the National Bureau of Statistics (NBS) for the month of June. Specifically, headline inflation advanced higher by 38bps during the month, to 22.79% y/y in June, compared to 22.41% y/y in May. This is the 6th consecutive increase since December 2022. On a month-on-month basis, headline inflation expanded by 19bps to 2.13%.
- The food index demonstrated an upward trend, experiencing a year-on-year increase to 25.25% compared to the 24.82% y/y recorded in May. The surge in food inflation is reflective of the price hikes across food categories, including oil & fat, bread & cereal, fish, potatoes, yams & other tubers, fruits, meat, vegetables, and spirits. The primary drivers behind this inflationary pressure were the elevated prices of food and non-alcoholic beverages, heightened costs of household items and clothing, and increased energy prices.
- Similarly, core inflation experienced an upward movement, reaching 20.27% y/y in April, representing a 21bps increase from the 20.06% y/y figure recorded in May. Additional insights from the report highlighted that prices of gas, air passenger transport, medical services, liquid fuel, and vehicle spare parts served as significant catalysts behind the upswing in core inflation figures.
- We believe that the impact of the PMS subsidy removal will have a more amplified effect on the inflation basket in the subsequent months. In addition, rising global energy costs amidst OPEC+’s extended supply cuts should continue to keep petroleum importation prices elevated. Hence, continued upward pressure on core inflation is likely.
- We opine that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will halt its rate hikes at the next MPC meeting on the 24th and 25th of July to fully observe the effects to which monetary policy has had on inflation.
