Inflation Report for September 2022 – Coronation Merchant Bank

The NBS has released its September inflation report to show –    
Headline rate 20.77% y/y (20.52% in August);
Core rate 17.60% y/y (17.20%); and
Food rate 23.34% y/y (23.12%).  

• September’s headline reading increased by 25bps (when compared with the previous month) to 20.77% y/y.
• On a month-on-month basis, headline inflation declined from 1.77% y/y in the previous month to close at 1.36% in September ’22. Given the expected impact of the ongoing flooding across states (including states within the middle belt – that is, food basket region) as well as fx depreciation in the parallel market which impacts prices of imported products and select items within the core measure, we expected the m/m to remain at or above 1.7%. 
• Food inflation recorded an increase of 22bps when compared with the previous month. For the food inflation rate (23.34%), the highest increases were recorded in bread, cereals, fish, meat, oil and fat, potatoes, yam, and other tubers.
• On a y/y basis, imported food price inflation increased by 5bps to 17.99% y/y from 17.94% y/y recorded in the previous month.
• Core inflation increased by 40bps to 17.60% y/y from 17.20% y/y recorded in the previous month. For the core inflation, price pressure was felt across gas, liquid fuel, garments, solid fuel, solid fuel and passenger transport by road and air.      
• The housing water, electricity, gas and other fuel segment increased by 16.42% y/y and 1.30% m/m. The transport segment also recorded an increase of 18.74% y/y and 1.55% m/m. These increases can be partly attributed to the price hikes in premium motor spirit, diesel, kerosene, and aviation fuel.             
• The NBS tracks headline inflation by state, with Kogi recording the highest (23.82% y/y) and Adamawa recording the lowest (18.42% y/y) in September ‘22. It is worth noting that household baskets vary across states due to different consumption patterns.         
• The CBN’s in-house estimates suggest that inflation is expected to maintain its upward trend, driven by exchange rate pressure, build-up of increased spending and demand for naira on the back of the upcoming 2023 general elections, among others. 
• Given the MPC’s resolve to restore price stability while providing necessary support to the economy, in our view, another policy rate hike at its November meeting is not far-fetched. The MPC is scheduled to hold its next meeting on the 21st and 22nd of November ’22.

To read the full report, click here. SOURCE: Coronation Merchant Bank