Business and Economy

Nigeria’s headline Inflation rose +172bps to 25.8% y/y in August

  • To reach 25.8% y/y in August, headline inflation jumped by +172bps in comparison to the previous month. The effects of the surge in the PMS price and the currency depreciation are mostly responsible for the rise in headline inflation.
  • Headline rate 25.8% y/y (24.08% July);
  • Core rate 21.15% y/y (20.47%); and
  • Food rate 29.34% y/y (26.98%). 
  • The headline inflation rate jumped from the previous month’s 2.89% to 3.18% on a monthly basis.
  • Inflation in the food sector (29.34%) increased by 235 basis points from the previous month. Prices for vegetables, milk, cheese, eggs, bread, cereals, potatoes, tubers, fish, and oil all saw significant price hikes. Due in great part to instability in areas where food is produced, expensive transportation, and storage problems, food inflation has stubbornly stayed high.
  • On a year-over-year basis, the inflation of imported food prices climbed by +23 bps to 20.17% y/y from 19.94% y/y in the previous month. NAFEX was N762.7/USD in August 23 compared to N429.4/USD in August 22.
  • Core inflation climbed by +67bps from the previous month’s 20.47% y/y to 21.15% y/y.
  • There was inflationary pressure felt in all areas, including passenger air and ground transportation, auto parts, medical services, and maintenance and repair of personal transportation equipment. The housing segment’s growth was 21.79% year over year and 2.96% month over month. Additionally, the transport sector saw growth of 27.10% y/y and 2.30% m/m.
  • Kogi had the highest headline inflation rate (31.50% y/y) according to the NBS data for each state. In contrast, Sokoto had the lowest (20.91% y/y) reading in August of 23. It is important to note that household baskets differ amongst states as a result of diverse consumption habits.
  • The increase in liquidity levels poses further risks to price stability in addition to the long-standing structural causes driving inflation. Broad Money Supply (M3) increased by +24.35% in June 2023 compared to +6.7% in May 2023, mostly due to growth in both net domestic and net foreign assets
  • The 25th and 26th of September are set aside for the MPC’s upcoming meeting. Given that headline inflation has continued to register increases, we anticipate a hold posture or a rate hike of +25 bps. SOURCE: Coronation Merchant Bank

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