Despite the typical boost from the October harvest season, food inflation surged by 30bps to 2.94% m/m (September: 2.64% m/m), resulting in a 39.16% y/y print (September: 37.77% y/y). This trend reflects persistent structural challenges undermining the agricultural sector’s productivity. Key factors include widespread flooding disrupting farming activities, ongoing conflict in the Northern region limiting agricultural operations, and rising input costs constraining harvest yields below historical averages, all of which have kept agricultural food prices elevated. Additionally, the persistent currency depreciation maintained upward pressure on imported food prices, while increased transportation costs –  a direct consequence of higher Premium Motor Spirit (PMS) prices – inflated retail food prices across the board.  To put this in perspective, October’s m/m food inflation significantly exceeded the five-year October average of 1.47%, underscoring the unusual intensity of current price pressures. Across sub-items, prices rose for Farm Produce (+20bps to 2.95% m/m) and Processed food (+33bps to 2.93% m/m), while Imported food prices saw a slight decline (-24bps to 3.37% m/m).

Concurrently, the core inflation increased by 4bps to 2.14% m/m (September: 2.10% m/m) within the review period after declining in September, pushing the year-on-year print higher to 28.37% (September: 27.43% y/y). Specifically, price pressures were sustained by the cumulative impact of (1) elevated energy costs, (2) increased naira volatility, (3) rising transportation expenses and (4) high cost of doing business. Consequently, we highlight that price pressures were significant across Transportation (+14bps to 2.99% m/m), Restaurants & hotels (+21bps to 3.47% m/m), Education (+10bps to 2.29% m/m), and Communication (+11bps to 0.33% m/m) sub-baskets. However, price pressures eased across the Alcoholic, Beverage and Tobacco (-52bps to 2.15% m/m), Utilities (-46bps to 1.85% m/m), and Furnishing & Household Equipment & Maintenance (-56bps to 1.88% m/m).  

Outlook: Consumer Prices to Remain Elevated in November

Typically, the main harvest period spans September through December across both the Northern and Southern regions. However, a recent report from the Farming Early Warning System Network (FEWSNET) suggests an impending deterioration in food security from November 2024 through May 2025, driven primarily by suboptimal harvest yields. This, combined with persistent naira volatility and festive-driven consumer demand, is expected to sustain price pressures on both locally produced and imported food items.  As a result, we expect food inflation to print 3.04% m/m in November, leading to a further increase in the year-on-year numbers (+160bps to 40.83%).

At the same time, prices within the core basket are poised to remain elevated, reflecting the combined effect of (1) naira depreciation, (2) elevated costs of energy, (3) increased transport expenses and (4) high operational costs.  Consequently, we project core inflation to increase by 2.16% m/m, cascading to 28.17% y/y (October: 27.42% y/y).

Taking these components together, the headline inflation is expected to print 2.65% m/m, pushing the year-on-year numbers higher to 34.60% in November (October: 33.88% y/y).