Headline Inflation Worsened to 34% in the Month of May

In May, the headline inflation rate in Nigeria increased by 26 basis points (bps) compared to the previous month, reaching 34% year-on-year (y/y). However, on a month-on-month basis, the headline inflation rate decreased by 15 bps to 2.1% from the 2.3% recorded in the previous month. This downward trend in month-on-month headline inflation has been consistent for the past three months since February ’24, which can be partly attributed to the restrictive monetary stance of the Central Bank of Nigeria (CBN).

• Headline rate: 34% y/y (33.7% in April)
• Core rate: 27% y/y (26.8%); and
• Food rate: 40.7% y/y (40.5%).

Food inflation in Nigeria, specifically, saw an increase of 13 bps compared to the previous month, reaching 40.7%. The prices of bread, cereals, oil and fat, meat, fish, potatoes, yam, and other tubers experienced the highest increases. On a year-on-year basis, imported food price inflation increased by 80 bps to 34.8% y/y from the previous month’s 34% y/y. Additionally, in May, the Nigerian Naira to US Dollar exchange rate depreciated by 6.8% month-on-month in the NAFEM window.

Core inflation rate in Nigeria, which excludes volatile food and energy prices, increased by 20 bps to 27% y/y from the previous month’s 26.8% y/y. Inflationary pressure was observed in passenger transport by road, medical services, housing, and medical services. The housing water, electricity, gas, and other fuel segment increased to 29.6% y/y but decreased to 2.1% month-on-month compared to 2.4% in April ’24. The transport segment also experienced an increase of 25.6% y/y and 2.4% month-on-month.

Headline Inflation Across the States

According to data from the National Bureau of Statistics (NBS), Bauchi state had the highest headline inflation rate in Nigeria at 42.3% y/y during the period, while Borno state had the lowest at 26% y/y. It is important to note that household consumption patterns vary across states, leading to different inflation levels.

During the last Monetary Policy Committee (MPC) meeting, the committee raised the policy rate by 150 bps to 26.25%. The next MPC meeting is scheduled to take place on July 22nd and 23rd of July ’24. It is anticipated that there may be a moderate hike of 50 bps to 100 bps or a decision to maintain the current stance. SOURCE: Coronation Flash Note