October 16, 2023/Coronation Report

Headline rate 26.72% y/y (25.80% August);
Core rate 21.84% y/y (21.15%); and
Food rate 30.64% y/y (29.34%). 

• September headline inflation increased by +92bps (when compared with the previous month) to 26.7% y/y. We maintain our view that this increase is largely attributed to the sustained impact of PMS subsidy removal and depreciation of the Naira against the USD, triggered by the fx liberalization policy.
• On a month-on-month basis, headline inflation increased by 2.1% compared with 3.2% recorded in the previous month.
• The food inflation (30.6%) recorded an increase of +130bps when compared with the previous month. The highest increases were recorded in the prices of vegetables, milk, cheese, eggs, bread, cereals, potatoes, tubers (potatoes, yam among others), fish, oil, and fat. This is the highest food inflation recorded since January 2009.
• On a y/y basis, imported food price inflation increased by +155bps to 21.7% y/y from 20.2% y/y recorded in the previous month. We note that NAFEX closed at N755.3/USD as at end-September ’23.
• Core inflation increased by +69bps to 21.8% y/y from 21.2% y/y recorded in the previous month. Inflationary pressure was felt across, passenger transport by air and road, medical services, maintenance and repair of personal transport equipment, and repair of furniture. 
• The housing water, electricity, gas and other fuel segment increased by 22.5% y/y and 1.87% m/m. The transport segment also recorded an increase of 27.2% y/y and 1.6% m/m. 
• Based on the NBS headline inflation by state, Kogi recorded the highest (32.9% y/y). Meanwhile, Borno recorded the lowest (21.0% y/y) in September ‘23. It is worth noting that household baskets vary across states due to different consumption patterns. 
• Inflation continues to be driven by structural issues such as high logistic costs, poor infrastructure, storage issues, exchange rate pressures, elevated cost of PMS as well as insecurity (especially in food-producing areas).
• The postponement of the September MPC meeting equates to ‘’no change’’ to the MPR. We understand that the new CBN Governor has not ruled out further rate hikes as a mechanism to stabilize inflation.

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