The NBS has released its August inflation report to show –

Headline rate 25.8% y/y (24.08% July);
Core rate 21.15% y/y (20.47%); and
Food rate 29.34% y/y (26.98%).  

• August headline inflation increased by +172bps (when compared with the previous month) to 25.8% y/y. The increase in headline inflation can be largely attributed to the implications of the spike in the PMS price and fx depreciation.
• On a month-on-month basis, headline inflation increased to 3.18% from 2.89% recorded in the previous month.
• The food inflation (29.34%) recorded an increase of +235bps when compared with the previous month. The highest increases were recorded in the prices of vegetables, milk, cheese, eggs, bread, cereals, potatoes, tubers, fish and oil. Food inflation has remained stubbornly high largely due to insecurity in food production areas, high logistics costs, and storage issues.
• On a y/y basis, imported food price inflation increased by +23bps to 20.17% y/y from 19.94% y/y recorded in the previous month. NAFEX in August ’23 stood at N762.7/USD vs N429.4/USD in August ’22.
• Core inflation increased by +67bps to 21.15% y/y from 20.47% y/y recorded in the previous month. Inflationary pressure was felt across, passenger transport by air and road, vehicle spare parts, medical services, maintenance and repair of personal transport equipment.
• The housing water, electricity, gas and other fuel segment increased by 21.79% y/y and 2.96% m/m. The transport segment also recorded an increase of 27.10% y/y and 2.30% m/m.
• Based on the NBS headline inflation by state, Kogi recorded the highest (31.50% y/y). Meanwhile, Sokoto recorded the lowest (20.91% y/y) in August ‘23. It is worth noting that household baskets vary across states due to different consumption patterns.
• Beyond the legacy structural factors driving inflation, the surge in liquidity levels pose further threats to price stability. Broad Money supply (M3) in June 2023 grew by +24.35% vs 6.7% in May 2023, driven largely by the increase in both net foreign assets and net domestic assets.
• The MPC is scheduled to hold its next meeting on the 25^th and 26^th of September. We expect a hold stance or a +25bps rate hike, given that headline inflation has continued to record upticks.

To read the full report, click here