August 2020 CPI: A Continued Increase in Inflationary Pressure

September 15, 2020/Cordros Report

Nigeria’s inflation maintained its uptrend in August as currency weaknesses, increase in the price of PMS, climate change, and insecurity in the food producing region of the country put pressure on both food and energy prices. According to data from the National Bureau of Statistics (NBS) headline inflation increased by 40bps to 13.22% y/y – the twelfth consecutive month of faster price growth and highest reading in 28 months. On a month-on-month basis, headline inflation increased by 9bps to 1.34%. The outturn is 13bps higher than Cordros’ estimate (13.09% y/y), with the largest variance stemming from the food basket, and 25bps higher than Bloomberg consensus (12.97% y/y) estimate.

Food inflation rose 52bps to 16.00% y/y during the review period. In our view, food price pressures stemmed from the troika effect of (1) rising flood and banditry cases in the northern part of the country, (2) PMS induced rise in transport cost, and (3) liquidity constraints in the FX market, which led to currency depreciation in the parallel market. 

Core inflation on the other hand, increased by 10.52% y/y. This was up by 42bps when compared with 10.10% recorded in July. Compared with previous month, core inflation increased by 30bps to 1.05%, stoked by the depreciation of the currency, increase in PMS Price (+2.9% m/m) and pressure in energy prices. We noticed pressure across all the core indices, save for Health (-2bps). The largest pressure was experienced in furniture & household equipment maintenance (+6bps), clothing and footwear (+4bps), HWEGF (+2bps) and transport (+2bps) components.

For September, we expect the pressure on consumer prices to be maintained, and see headline CPI at 1.30% m/m in August, with the low base in corresponding period of 2019 cascading into a 29bps increase in y/y inflation rate to 13.51%.

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