April 15, 2024/InvestmentOne Report

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• The recently released Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS) revealed that inflation maintained its upward trend in the month of March 2024 amidst various challenges facing the Nigerian economy. Specifically, headline inflation rose to an unprecedented high of 33.20%, reflecting a sharp jump from 31.70% recorded in the previous month. In our view, this can be largely attributed to the elevated prices of goods and services in the country which has stoked a cost-of-living crisis amid high cost of input for household and businesses. However, on a month-on-month basis, the report showed a 3.02% rise in headline inflation which is 10bps lower than what was recorded in February 2024.
• Unsurprisingly, food inflation printed higher, as the legacy issues exerting pressure on food prices remained prevalent in the month of March. These challenges include high cost of input, poor road, and transportation network, as well as elevated energy prices fueling high cost of transportation and the persistent insecurity challenges in food producing parts of the country. Consequently, food inflation rose to an all-time high of 40.01%, jumping from 37.92% in February 2024. However, the food inflation rate declined on a month-on-month basis by 17bps to 3.62% in the month of March.

• On the other hand, core inflation, which outstrips volatile food and energy prices rose to 25.90% in March, 77bps higher than what was recorded in February on the back of the pass-through effect of elevated energy prices which has adversely affected input cost for businesses. Similarly, the core index increased by 37bps to 2.54% in March. Further analysis of the report disclosed that the pressure on core inflation was driven by Restaurant & Hotels (+199bps to 27.13%), Beverage & Tobacco (+118bps to 20.47%), Household Maintenance (+162bps to 27.65%) and Recreation & Culture (+43bps to 9.82%) in the period under review.

• Going forward, we maintain our prognosis of elevated consumer prices in subsequent months given the increasing cost of essential goods and challenging macroeconomic environment for businesses and households. This is also hinged on the persistent structural issues affecting food supply which have been prevalent in recent months. However, we see scope for a moderation in inflationary pressures later in the year mostly on the back of high base effect and the contractionary stance of the rate setting committee of the Central Bank of Nigeria (CBN).