Inflation Report – December 2021

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January 17, 2022/Coronation Research

The NBS has released its December inflation report to show –

Headline rate 15.63% y/y (15.40% in November):
Core rate 13.87% y/y (13.85%); and
Food rate 17.37% y/y (17.21%).    

  • December’s headline reading increased by 23bps (when compared with the previous month) to 15.63% y/y. On a month-on-month basis, headline inflation increased by 1.8% in December from 1.1% recorded in November. The uptick in December’s headline inflation rate can be partly attributed to increased spending during the festive period. The average headline inflation figure for 2021 is 16.98%, which is 377bps higher than 13.21% recorded in 2020.     
  • Food inflation recorded an increase of 16bps when compared with the previous month. The highest increases were recorded in meat, fish, fruits, bread, cereals, soft drinks, potatoes, yam, and other tubers. 
  • On a y/y basis, imported food price inflation increased by 6bps to 17.34% y/y from 17.28% y/y recorded in the previous month.
  • Core inflation increased by 2bps when compared with the previous month. The highest increases in core inflation were recorded in prices of gas, liquid fuel, tobacco, wine, garments, shoes, clothing accessories, among others. 
  • The NBS tracks headline inflation by state, with Ebonyi recording the highest (18.71% y/y) and Kwara recording the lowest (12.32% y/y). It is worth noting that household baskets vary across states due to different consumption patterns.             
  • The CBN’s in-house estimates suggest that further rebound in economic growth is hinged on the continued stability in oil price, availability of COVID-19 vaccines as well as high turnout for vaccination in Nigeria and support by both monetary and fiscal policy.             
  • We commend the FGN’s efforts towards improving national security which by extension, should contribute to easing bottlenecks affecting food supply. This bodes well for the food inflation rate. However, factors such as electioneering and the potential removal of PMS subsidy could keep headline inflation at double-digit in 2022.
  • Based on the latest personal statements of MPC members, although the headline inflation rate is above the 6-9% benchmark, efforts at mitigating supply induced inflation are yielding results, while routine monetary sterilisation is assisting with keeping monetary induced inflation under control, without requiring adjustments to the primary policy levers.
  • The MPC is scheduled to hold its next meeting on the 24th and 25th of January ‘22.

To read the full report, click here

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