February 16, 2024/Coronation Research

• January Inflation inflation increased by +98bps (when compared with the previous month) to 29.90% y/y.

• On a month-on-month basis, headline inflation increased by +35bps to 2.64% compared with 2.29% recorded in the previous month.
• Food inflation (35.41%) recorded an increase of +148bps when compared with the previous month. The highest increases were recorded in the prices of bread, cereals, oil and fat, meat, milk, fruits, coffee, tea, fish, potatoes, cocoa, yam, and other tubers.
• On a y/y basis, imported food price inflation increased by +140bps to 26.30% y/y from 24.90% y/y recorded in the previous month.
• Core inflation increased by +53bps to 23.59% y/y from 23.06 % y/y recorded in the previous month. However, Inflationary pressure was felt across, passenger transport by air and road, medical services, housing, and pharmaceutical products.
• The housing water, electricity, gas and other fuel segment increased to 24.7% y/y and 2.1% m/m. The transport segment also recorded an increase of 25.9% y/y and 1.3% m/m.
• Based on the NBS’ headline inflation by state, Kogi recorded the highest (35.79% y/y). Meanwhile, Borno recorded the lowest (22.57% y/y) in January ‘24. 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 pressure, elevated cost of PMS as well as insecurity (especially in food-producing areas).
• The first MPC meeting under the tenure of the new CBN Governor, has been scheduled for the 26^th and 27^th of February 2024.  The CBN plans to hold six meetings in 2024. We expect a rate hike at the upcoming MPC meeting.
• We expect Inflation to remain elevated in Q1 2024, followed by modest declines on the back of positive base effects and restrictive monetary policies.