September 17, 2024/InvestmentOne Report
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- According to the latest data released by the National Bureau of Statistics (NBS), the Consumer Price Index (CPI) for August indicated a continuation of the anticipated downward trend in inflationary pressures. The report revealed that the year-on-year (YoY) inflation rate decreased by 125bps to 32.15% in August, marking a significant reduction in overall inflationary pressures. The overall month-on-month headline inflation rate showed a slight deceleration, decreasing by 8bps to 2.22% from 2.28% in the previous month. This marginal decrease is closely linked to the slow down in the food basket, reinforcing the impact of seasonal factors on inflation dynamics.
- The food inflation component, a key driver of overall inflation, experienced a significant drop of 201bps, reaching 37.52% YoY. This considerable reduction is largely attributed to the ongoing harvest season, which typically leads to increased food supply and subsequently lower prices. The current food inflation rate represents a remarkable drop from its recent high of 40.87%, underscoring the effectiveness of seasonal factors in moderating food prices.
- In contrast to the easing food inflation, core inflation continues to show upward momentum. In August, core inflation rose by 12bps to 27.58% YoY. Similarly, on a monthly basis, it increased by 11bps to 2.27%. The rise in core inflation was driven by price increments in Education (+25bps to 1.42% MoM), Transport (+0.21 to 2.68% MoM), Restaurant and Hotels (+0.15% to 2.63% MoM) and (+2bps to 1.84% MoM).
- Going forward, we expect inflation to remain sticky as the PMS price increment is expected to place further pressure on the prices of goods and services. In the last few months, the nation has experienced tight PMS supply due to the increased debt portfolio of the Nigerian National Petroleum Corporation (NNPC) which failed to fulfil its payment obligations. However, this has been sorted through local sourcing from the Dangote refinery and is expected to keep supply level optimal and help to balance out energy prices in the country. However, despite the arrangement by the government, this has caused an adverse shock in terms of price increment as we saw PMS prices go from NGN597 to NGN855.
