July CPI: Food Prices Underpin Inflationary Descents

August 16, 2019/Cordros Report

For the second consecutive month, Nigeria’s headline inflation reading decelerated. For July, inflation slowed by 14bps to 11.08% y/y – the lowest reading since Feb 2016. While the moderation was primarily due to moderation in food prices, we highlight that the core inflation remained largely contained, given stable FX and subdued energy prices.
 
For emphasis, core inflation settled in the single-digit territory, after declining marginally by 1bp to 8.80% y/y – the lowest in 43 months. The decline in the core basket was driven by the declines in the HWEGF (-0.04% y/y), Transport (-0.16% y/y), and Education (-0.27% y/y) sub-baskets. On a month-on-month basis, after three consecutive months of upticks, core inflation resumed its descent, shedding 9 bps to 0.77% m/m in the period.

Elsewhere, food inflation moderated markedly by 19bps to 13.39% y/y – the lowest level since November 2018. The breakdown revealed declines across all the sub-components, with Farm Produce – 95% of the food index – declining by 23bps, while Processed Foods moderated by 86bps.

Overall, we expect headline inflation to print 10.90% y/y for August (0.89% m/m)

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