MON 18 OCT, 2021-theGBJournal- Although the primary harvest season is expected to be below-average due to the persistent securities challenges in the country, Cordros Research analysts say they expect an increased supply of farm produce to the markets in October.
‘’However, diesel (August: +14.6% y/y vs July: +11.8% y/y) and Liquefied Petroleum Gas (LPG) prices have continued to increase primarily due to the impact of the increase in crude oil prices, current global energy crunch, and FGN’s re-imposition of VAT on imported LPG.’’
Given this scenario, Cordros expects the pass-through impact of increased transportation cost on food prices to limit the gains from the primary harvest season. Sequentially, they now expect food prices to moderate by 6bps to 1.20% m/m in October, translating to a y/y reading of 18.68%.
Besides, the increased prices of diesel and LPG is projected to continue to negatively impact the costs of transportation and utilities, both of which account for 45.3% of the core basket.
‘’We also note that currency pressure at the parallel market remains a significant headwind for the core basket despite stable PMS prices.’’
Consequently, Cordros forecasts core inflation to increase by 1.29% m/m, translating to 13.79% y/y in October.
‘’On balance, we look for m/m headline inflation reading of 1.27% in October, with the high base effect from the corresponding period of 2020 translating to 30bps moderation in y/y headline inflation to 16.32%.’’
Nigeria’s headline inflation moderated for the sixth consecutive month in September to 16.63% y/y, relative to 17.01% y/y in the prior month. The moderation in the headline index is consistent with Cordros expectation for a base effect induced deceleration even as energy prices stoked upward pressures on domestic inflation on a month-on-month basis.
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