Nigeria Economy | |
Nigeria Economy | |
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Monday,
December 11, 2017 / 5:49PM /Vetiva Research
Nigeria’s
inflation statistics for November came in very close to October readings,
underscoring the current stickiness of inflation. Headline inflation registered
at 15.9% y/y, the same as in October and slightly above Vetiva and Consensus
estimates of 15.8% y/y. Similarly, Food Inflation registered at 20.3% y/y and
0.88% m/m in November, compared to 20.3% y/y and 0.85% m/m in October. Finally,
Core Inflation registered at 12.2% y/y and 0.77% m/m in November, compared to
12.1% y/y and 0.76% m/m in October.
And
beyond the usual challenges with food and energy prices, Nigeria’s underlying
inflation is remarkably sticky. Annual Inflation (excl. food and energy prices)
between August and November reads as follows: 12.70%, 12.71%, 12.73%, 12.72%.
Food
prices find serenity
Food
inflation looks to have peaked in recent months (3-month average: 20.3% y/y),
and this surge has been driven by increases in the prices of staples such as
bread and cereal, milk, cheese, cocoa, and fish. We note that the severe food
price pressures from the earlier parts of the year have subsided – Qtd average
m/m inflation: 0.86% vs. 1.73% average in the first nine months of the year. On
the imported food front, prices rose at a higher pace in November (15.7% y/y
vs. 15.3% y/y in October), but the pace of price increase slowed on a monthly
basis (1.24% m/m vs. 1.30% m/m in October).
Energy
prices moderate but outlook is murky
Energy
prices moderated across the country in November as prices of Household Kerosene
(HHK), Premium Motor Spirit (PMS) and Automotive Gas Oil (diesel) declined
2.3%, 0.3% and 1.3% to ₦267.14, ₦145.60 and ₦199.26 respectively.
This improvement in pricing is consistent with higher levels of product
truckout reported by the Ministry of Petroleum Resources. Specifically, average
daily truckout for dual-purpose kerosene (used as HHK), PMS and diesel rose
from 0.7 million litres, 27.1 million litres and 5.0 million litres to 1.2
million litres, 31.3 million litres and 8.5 million litres respectively.
However,
we highlight recent challenges with PMS distribution in some states of the
country. Amidst recent higher oil prices, disruptions in getting refined
products to the depots have exerted pressure on the price charged by the depots
and this, in turn, is pressuring the pump price. Amidst strike threats by
petroleum marketers and queues building up, we see a greater risk of black
markets for the product in the interim.
Many
inflation factors but outlook little changed
Ongoing
stability in the exchange rate and food prices are significant positives for
Nigeria’s inflation moving forward. On the other hand, whilst high global oil
prices support Nigeria’s fiscal and foreign exchange position, they put
pressure on petroleum product prices in the country. Nevertheless, we expect
regulation and Nigerian National Petroleum Corporation interventions to cap the
impact of relatively strong global oil prices. Meanwhile, we do not consider
electricity tariff hikes to be politically feasible at this point and do not
account for the prospect in our forecasts.
Finally,
any effect of increased festive spending should be countered by base effects.
Moving forward, we are keeping an eye out on the effect of any monetary easing
by the apex bank on Nigeria’s pricing environment. Overall, we expect inflation
of 15.7% y/y in December (Previous: 15.6% y/y), translating to 2017 average
inflation of 16.7% (2016: 15.6%). With the inflation outlook little changed, we
do not expect the apex bank to alter its near-term monetary course.
Related News
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Inflation Drops to 15.90% in November 2017; 0.01% Lower Than 15.91% October
Rate
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Rate to Decelerate Further to 15.84% in November
4. Inflation:
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6. Manufacturing
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7. Surge
in Trade Surplus in Q3 2017
8. Manufacturing
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9. Nigeria PMI -
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10. PMI Reading No
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11. A Welcome Surge
in Capital Imports
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13. Effective
Reporting of the Travel and Tourism Industry Using Appropriate Data
14. Total Value of
Capital Imported into Nigeria in Q3 2017 Estimated at $4,145.1m - NBS