April 2022 Inflation Report: Acceleration in Headline Inflation

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May 17, 2022/InvestmentOne Report

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  • Recently, the National Bureau of Statistics (NBS) released the April 2022 inflation report which revealed that inflation sustained the upward trajectory witnessed in previous months. In specifics, headline inflation jumped by 90bps to 16.82% y/y in April 2022, which is higher than the 15.92% y/y recorded in March 2022. We highlight that inflationary pressures were broad based given the uptick in the Food and Core inflation. On a month-on-month basis, headline inflation stood at 1.76%, 2bps higher than the month-on-month movement in March 2022.
  • Per the norm, food sub index remained the major driver of headline inflation. As such, food sub-index accelerated by 117bps to 18.37% in April 2022. We posit that the surge in the index was due to an increase in the prices of staple foods, specifically caused by increases in prices of bread and cereals, rice, potatoes, yam, vegetable oils, fish and meat, amongst others. We are of the view that the rise in food prices may not be unconnected to the lean food/produce in circulation given the onset of planting season, elevated global food commodities prices due to the impact of the geopolitical crises and the pass-through impact of high energy prices on transportation cost.
  • Elsewhere, core inflation reversed the downtrend we saw in the previous month as it expanded to 14.18% in the review month – higher than the 13.91% printed in March 2022. On a month-on-month basis, the index rose by 1.22%, 24bps higher than the previous month. We attribute the pressure in the core index to the elevated diesel or energy prices emanating from the geopolitical tensions.
  • Going forward, we expect inflationary pressures to remain elevated in the near term amid factors such as (1) global increase in commodities prices and its attendant impact on imported food index (2) ripple effect of the higher energy prices on the core index (3) FX liquidity challenges and (4) reduction in food supply as the harvest season ends. In addition, growing insecurity levels in the northern part of the country, may limit farmers ability to plant and harvest their desired quantity of crops.

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