The Structural Origins of Rising Inflation


Wednesday, September 16, 2020 / 09:48 AM / by FBNQuest Research / Header Image Credit: The CEO Magazine


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Headline inflation accelerated for the twelfth successive month in August to 13.22% y/y from 12.82% the previous month. (Our expectation, shared with the newswires, was a little changed rate of 12.85% with a positive harvest impact). Food price inflation quickened from 15.48% y/y to 16.00%. The core (non-food) measure ticked up from 10.10% y/y to 10.52% according to the NBS report.

All three measures are moving in the wrong direction both y/y and m/m.


The report shows m/m increases of 1.1% and 1.2% for the transport and health components of the basket respectively, compared with 1.0% for the core measure. The bureau's commentary singles out above-average price increases for several items that reflect the impact of Covid-19 and the selective lockdown including: medical, paramedical and hospital services, pharmaceuticals, passenger transport and vehicle spare parts.


As for food price inflation, any positives from the main harvest were outweighed by the familiar constraints (general insecurity, herder/farmer clashes, poor roads and other infrastructure flaws).



Consumer price inflation (% chg y/y)

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Sources: National Bureau of Statistics (NBS); FBNQuest Research


The NBS reports include data by state. The headline rate in August was highest in Ondo at 2.2% m/m and lowest in Sokoto at 0.5%.


This latest increase makes further monetary easing less likely. It also pushes the policy rate further into negative territory in real terms.


Our take is that the headline rate will be little changed in September at 13.50% y/y.


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