Another Rise in Inflation Driven by Food Prices

Friday, October 16, 2020  10:59 AM / by FBNQuest Research / Header Image Credit: Bloomberg

Headline inflation accelerated again in September to 13.71% y/y from 13.22% the previous month. (Our expectation, shared with the newswires, was a little changed rate of 13.30% with a positive harvest impact.) Food price inflation quickened from 16.00% y/y to 16.66%. The core (non-food) measure ticked up from 10.52% y/y to 10.58% according to the NBS report.

The report shows m/m increases of 1.2% for both the transport and health components of the basket, compared with 0.9% for the core measure. The bureau's commentary singles out above-average price increases for several items that reflect the impact of life with Covid-19, including medical and hospital services, pharmaceuticals, and passenger transport.

Anecdotal evidence points to positives from the main harvest in the next report (for October). Such were outweighed in the current report by the usual constraints (insecurity, herder/farmer clashes and poor roads to market). That food price inflation has accelerated beyond the measure for imported food (see chart) points to the scale of these constraints.

The NBS reports include data by state. The headline rate in September was highest in Bauchi at 3.4% m/m and lowest in Ondo at 0.3%. The bureau cautions that the basket varies from state to state.

This latest increase makes further monetary easing less likely.

Our call is that the headline rate will be a little lower in October due to a modest harvest impact, at 13.4% y/y.

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