January 16, 2024/InvestmentOne Report
Please click to download our December 2023 Inflation Update
- Inflation statistics for December as published by the National Bureau Statistics, shows that inflationary pressures have intensified slightly. According to the reports, in the final month of the year, inflation rose from 28.20% YoY in November to 28.92% YoY indicating a 72bps increase from previous month. This figure presents the 12th consecutive increase as inflation reached a 27-year high. Although it has remained elevated, inflation was able to escape previous estimates of reaching 30% levels by December.
- Notably, food inflation has emerged as the predominant driver, experiencing a significant uptick of 109bps to reach 33.93% YoY in December, compared to 32.84% YoY in November. A closer look at the report reveals that this surge can be attributed to rising prices of key food items, including Oil and Fat, Meat, Bread and Cereals, Potatoes, Yam & Other Tubers, Fish, as well as Milk, Cheese, and Eggs. From our perspective, this consistent escalation in food prices may be intricately linked to several factors.
- Conversely, core inflation, excluding volatile food and energy prices, followed suit in the upward trend, as the core index increased to 23.06% YoY in December, marking a 68bps uptick from the 22.38% YoY recorded in the previous month. Notable surges were observed in the prices of Passenger Transport by Road, Medical Services, Actual and Imputed Rentals for Housing, Passenger Transport by Air, Pharmaceutical Products, Accommodation Services, among others.
- Looking ahead, we expect the YoY inflation rate to trend lower, largely due to the base effect. Secondly, while the initial policy changes with regards to exchange rate and petroleum subsidy removal led to price hikes, their long-term impact is expected to stabilize the economy and ultimately alleviate inflationary pressures. Moreover, the potential easing of global food and energy prices could further contribute to lower imported inflation in Nigeria.
