SAT 18 SEPT, 2021-theGBJournal- The sudden tick up in Nigeria’s month-on-month inflation rate in August has raised eyebrows, prompting many analysts to focus attention on the deviation despite the overall moderation in inflation rate.
According to the National Bureau of Statistics (NBS), on a month-on-month basis, the headline inflation notched up by 9bps to 1.02% m/m. The urban index also rose by 1.06 percent on a month-on-month basis in August 2021, up by 0.08 the rate recorded in July 2021 (0.98), while the rural index also rose by 0.99 percent in August 2021, up by 0.12 the rate that was recorded in July 2021 (0.87) percent.
Yvonne Mhango, Sub-Saharan Africa Economist, Head of Research, SSA, Renaissance Capital, the emerging and frontier markets focused investment bank, described the deviation as ‘’a concern.’’
‘’While the slowdown in YoY food inflation is encouraging, it concerns us that MoM inflation picked up in August to 1.6%, this after slowing from 1.9% in March to 0.9% in July,’’ she said in note to theGBJournal.
‘’The good news is that global food price inflation has peaked, and is slowing, which should help temper imported food inflation,’’ she added.
The worry here is that it is likely to show up on a sustained basis, after all the country is still in the middle of COVID-19 Delta variant pressure, and the economy is still far from being normal.
Cordros Research analysts also noted the increase which is 6bps higher than their estimate (16.95% y/y), with the deviation mainly from the core basket but was in line with Bloomberg’s median consensus estimate (17.00% y/y).
Meanwhile, headline inflation slowed for a fifth consecutive month to 17.0% YoY in August, however, it increased from 13.2% YoY a year earlier. The slowdown over the past five months has been due to YoY food inflation, which came in at 20.3% in August, from a YtD high of 22.9% in March.
YoY imported food price inflation, which has been on the increase since January, was flat at 17.1% in August, vs July, implying the slowdown in August was due to domestic food prices.
After increasing over the past several months, core inflation (excludes farm produce) slowed to 13.4% YoY in August, vs 13.7% in July. The moderate slowdown was largely due to transport and healthcare prices.
‘’We think it is too soon to say whether this is the beginning of a downturn in core inflation,’’ Renaissance Capital said.
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