Friday, November 17, 2017 /9:05AM /FDC
inflation slowed to 15.91% in October from 15.98% in September. The inflation
numbers confirm a trend of declining inflation, marking the ninth consecutive
decline in 2017. Month-on-month inflation also eased to 0.76% (9.54%
annualized) in October from 0.78% (9.77% annualized) in September.
Food and core
inflation moved in opposite directions in the month of October. Food inflation
declined marginally by 1bp to 20.31% from 20.32% in September. On the
other hand, core inflation increased to 12.14% in October from 12.12% in
in Nigeria is moderating, but could swing upwards if there is a surge in money
supply and wages increase sharply, causing demand-pull inflation.
Breakdown of inflation data
Food sub index
Food inflation rose by 20.31% in October – 0.01% lower
than September’s rate of 20.32%. On a month-onmonth basis, food inflation fell
by 2bps to 0.85% in October. This is the lowest level recorded so far in 2017.
Domestic food inflation benefited from the bountiful harvest as beverages,
tobacco and grains recorded price drops in the month of October. But imported food
inflation spiked to 15.34% in October from 14.83% in September. This can be
partly attributed to the increase in demand for export as consumer confidence
improved in the last three months.
Core sub-index is back up again
The core sub-index is back up again, increasing to
12.14% in October from 12.12% in the previous month. The main drivers were
mechanical maintenance and logistics cost. Diesel prices rose to N205/litre in
October from N185/litre in the previous month. But an improvement in power
supply – from 3,433MW/hr in September to 3,696MW/hr in October – restricted the
impact of rising diesel prices.
Rural and Urban sub-index
The urban and rural sub indexes moved in opposite
directions in October, just like in the previous month. The urban index
increased to 16.19% in October from 16.18%. This can be attributed to higher
logistics costs in the urban region as earlier explained. While rural index
declined further to 15.67% in October from 15.81%, mainly as a result of the
decline in domestic food inflation in the region.
Statistics released by the NBS show that Kogi state
recorded the lowest level of inflation in October – 9.83%. This was mainly
driven by a bountiful harvest. Food items such as cashew and cassava recorded
major increases in output during the period.
Bauchi state on the other hand recorded the highest
inflation rate of 23.87% in October; closely followed by Nassarawa and Kebbi
states, with inflation rate of 20.23% and 19.17% respectively.
released showed that eight out of the 10 states that recorded the highest
levels of inflation are located in the northern region of Nigeria. While six of
the 10 states with the lowest inflation rates were from the South-South and
South-East regions of Nigeria.
Also, seven of
the 10 states with the lowest inflation rates were those with the highest
salary arrears. They are Kogi, Delta, Edo, Abia, Benue, Imo and Akwa Ibom.
came with a caveat that indices cannot be compared one-for-one due to varying
most countries in SSA recorded declines in headline inflation. This was
mainly driven by the improvements in domestic food yields. With the exception
of a few countries like Ghana, transport and maintenance costs remain key
concerns for most of SSA. This has negatively impacted both logistics and
utilities costs in these countries.
inflation is likely to rise marginally in the remaining part of the year, as
end of year festivities are set to drive up aggregate demand. Though declining
domestic food prices might somewhat limit the impact of heightened inflationary
pressure resulting from the boost in aggregate demand.
The MPC is
scheduled to hold its last meeting for the year on November 20/21 while Q3’17
GDP figures are expected on November 20. We expect the GDP figures to be
reflective of an economy gaining momentum on the path to recovery. While it
makes the case for an interest rate cut more compelling, we expect the
committee to maintain its wait and see approach and not review current rates
until the end of Q1’18.