November 16, 2023/CSL Research
The National Bureau of Statistics (NBS) reported that the Headline inflation rate increased to 27.33% y/y in October, 61bps and 624bps higher than the inflation rate of 26.72% and 21.09% reported in September 2023 and October 2022 respectively.
On a month-on-month basis, the nation’s headline inflation rate advanced by 1.73% m/m which is 37bps lower than the recorded rate of 2.10%m/m for September 2023. The increase in the inflation rate was driven by increases in both food and core inflation. Inflation in Nigeria has been on the rise in recent years, eroding income and savings. The Tinubu administration’s recent reforms have contributed significantly to the hike in inflation rate this year.
Food Inflation rate increased the highest, up 88bps to 31.52% y/y in October 2023 compared with 30.64% in September 2023 and 780bps higher than 23.72% reported in October 2022.
The rise in the food inflation rate was driven by significant increases in imported food (+22.76% y/y), alcoholic beverages, tobacco & kola (+31.31% y/y) and food & non-alcoholic beverages (+16.45% y/y).
Core Inflation rate (“All Items Less Farm Produce and Energy”) advanced by 22.58% y/y in October 2023 from 21.84% and 17.46% y/y in September 2023 and October 2022 respectively. The highest increases were seen in transport (+27.04% y/y), restaurant (+24.03%y/y), health (+23.32%y/y) and miscellaneous Goods/services (+22.03%y/y).
The direct and indirect effects of the weakness in the currency and the removal of the subsidy on petrol remain the major drivers of inflation in our view. Looking ahead, we expect the inflation rate to continue to rise. The period leading to Christmas is usually characterized by increases in the prices of goods and services.
In view of this, we retain our forecast that the headline inflation rate will reach 28.7% y/y at the close of FY 2023 and may go as high as 29.8%. The Monetary Policy Committee (MPC) faces a tough choice in the next MPC meeting, the first to be chaired by the new CBN Governor.
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