Nigeria Inflation Report for December 2022 – Coronation Merchant Bank

The Nigeria Bureau of Statistics has released the December inflation report whicho show –    
     
Headline rate 21.34% y/y (21.47% in November);
Core rate 18.49% y/y (18.24%); and
Food rate 23.75% y/y (24.13%).  

• The headline figure for December dropped by -12bps (in comparison to the prior month) to 21.34% y/y.
• The headline inflation rate climbed from the previous month’s 1.39% to 1.71% on a monthly basis. The seasonal demand spike brought on by the end-of-year festivities and increases in manufacturing costs as a result of high energy prices are two factors that contribute to the m/m increase. Transportation costs, which were affected by the current fuel shortage, are among the other considerations.
• This increase is consistent with our expectations that the m/m figure will remain at or above 1.5%, and it reflects the lagging impact of food supply disruptions caused by incidents of flooding across states in the middle belt (i.e., the region of the food basket), in addition to currency depreciation and seasonal factors.
• This growth is consistent with our expectations that the m/m figure will remain at or above 1.5% and reflects the lagging impact of food supply disruptions brought on by incidents of flooding in states throughout the middle belt (i.e., the region of the food basket), in addition to currency depreciation and seasonal increases in demand.
• When compared to the prior month, the food inflation rate (23.75%) showed a decrease of -37bps. The most significant price rises were seen for fish, oil and fats, potatoes, yams, and other tubers.
• When compared to the previous month, the inflation rate for imported food rose by 11bps to 18.35% y/y from 18.24% y/y.
• Core inflation climbed by 25bps to 18.49% y/y from the previous month’s reading of 18.24% y/y. Gas, liquid fuel, clothing, fuels and lubricants for personal transportation equipment, solid fuel, air travel for passengers, and auto parts were all affected by inflation.
• The housing segment’s growth was 17.52% year over year and 1.47% month over month. Additionally, the transport sector had growth of 20.16% y/y and 1.78% m/m. These rises in the transportation sector can be partially related to recent fuel shortages as well as price increases in deregulated goods like diesel, kerosene, and aviation fuel.
• According to the NBS, Taraba had the lowest headline inflation rate (18.98% y/y) in December of 22 while Bauchi had the highest (23.79% y/y). It is important to note that household baskets differ amongst states as a result of diverse consumption habits.
• The cost of doing business is impacted by structural problems that cause inflation, such as uncertainty, high commodity prices, exchange rate pressure, and increasing spending in anticipation of the general elections in 2023, among other things.
• The cost of doing business is impacted by structural problems that cause inflation, such as uncertainty, high commodity prices, exchange rate pressure, and increasing spending in anticipation of the general elections in 2023, among other things. The CBN/MPC adopted a contractionary posture last year to control inflation. The policy rate increased from 11.5% in April to 16.5% at the end of 2022 by +500bps.
• In our opinion, another policy rate increase in H1 2023 is not unlikely given the MPC’s commitment to restoring price stability while providing essential support to the economy. The 23rd and 24th of January, 23 will see the next meeting of the MPC.
• Click here to read the complete report.