January 15, 2021/Cordros Report
Nigeria’s headline inflation maintained its upward trajectory, as it expanded by 86bps in December 2020 to 15.75% y/y (November: 14.89% y/y) – the highest level since November 2017. We note that the inflation print is broadly in line with our estimate of 15.74% y/y. On a month-on-month basis, headline inflation rose by 1bp to 1.61% – the highest level since May 2017. With the December tally, headline inflation averaged 13.21% in 2020FY (2019FY: 11.39%).
Food inflation also sustained its northward movement, rising by 126bps to 19.56% y/y. Notably, the highest price increases were recorded in Bread and cereals, Potatoes, Yam and other tubers, Meat, Fruits, Vegetable, Fish and Oils and fats. On a month-on-month basis, food inflation expanded by 2.05%, compared to the 2.04% recorded in the previous month. We believe the sustained pressure in the food basket is reflective of the impact of (1) the underwhelming harvest season, (2) persistent security challenges in the food-producing regions, and (3) festive induced demand which further widened the demand supply imbalance.
Similarly, core inflation rose by 32bps to 11.37% y/y. Pressures were most significant in the prices of Passenger transport by air, Medical services, Hospital services, Shoes and other footwear, Passenger transport by road, Repair of furniture, Vehicle spare parts, Pharmaceutical products, Motor cars, Maintenance and repair of personal transport equipment, Paramedical services, Motor cycles, Dental services and Bicycles. On a month-on-month basis, the core index was up by 39bps to 1.10%, relative to the 0.71% recorded in the previous month.