July 15, 2024/Coronation Research

  The NBS has released its June inflation report to show
Headline rate: 34.2% y/y (34% in April)
            Core rate: 27.4% y/y (27%); and
            Food rate: 40.9% y/y (40.7%).  

• June’s headline inflation increased by +24bps to 34.2% y/y compared with 34% in May ’24. Our in-house projection for June’s headline inflation was 34.4% y/y
• On a month-on-month basis, headline inflation rose slightly by +17bps to 2.3% from 2.1% recorded in the previous month. Therefore, disrupting the downward trend in m/m headline inflation observed since February ’24.
• Food inflation (40.9% y/y) recorded an increase of +21bps when compared with the previous month. The highest increases were recorded in the prices of bread, cereals, oil and fat, fish, potatoes, yam, and other tubers. On a y/y basis, imported food price inflation increased by +160bps to 36.4% y/y from 34.8% y/y recorded in the previous month.
• In the foreign exchange market, the NGN/USD recorded a modest m/m depreciation of -1.3% in the NAFEM window. It closed the month at N1,505.3 per USD. The passthrough effective of NGN/USD depreciations on inflationary pressures remains visible.
• Core inflation increased by +36bps to 27.4% y/y from 27% y/y recorded in the previous month. Inflationary pressure was felt across, housing, passenger transport by road and medical services. The housing water, electricity, gas, and other fuel segment increased to 30.3% y/y. However, it increased to 2.2% m/m compared with 2.1% recorded in May ’24. The transport segment remained steady at 25.6% y/y and 2.4% m/m in June ’24.
• From state government perspectives, the NBS data shows that Bauchi state recorded the highest inflation level at 44% y/y during the period, while Borno state recorded the lowest at 25.9% y/y. It is worth noting that household baskets vary across states due to different consumption patterns.
• The next monetary policy committee meeting is scheduled to hold next week. Given the current inflation-targeting posture, we anticipate a moderate policy rate hike or a hold stance. Looking ahead, we see Nigeria’s headline inflation moderating marginally but remaining above 30% in Q3 ‘24.
• ould actively diversify their portfolios across various sectors to spread risk and optimize returns. This should include inflation-protected securities such as government bonds, real estate assets and commodities, among others. Additionally, implementing currency hedging strategies is crucial to mitigate the impact of exchange rate fluctuations and protect the value of investments.
              

   To read the full report click here