A very modest uptick in inflation

The latest report from the NBS has headline inflation y/y at 11.3% in September. We have passed the point of inflection in this cycle although the pick-up of just 5bps on the month is far smaller than we had seen. Our expectation was a rise to 11.7% y/y, driven in good part by insecurity in food-growing areas. Food price inflation ticked gently upwards from 13.2% to 13.3 y/y.

  • Core inflation slowed to 9.8% and so returned to a single-digit level for the first time since January 2016. The bureau’s report observed, unsurprisingly, that price pressures were particularly high for fuels and lubricants for personal transport. A squeezing of household demand continues to hold down core inflationary pressures. It is the narrative favoured by listed consumer goods companies.
  • We acknowledge the personal statement of the member of the MPC after the meeting in late July that shared the house view the headline rate y/y would continue to slow through to November (2018).
  • The committee sees inflationary pressures building up over time due to a combination of familiar reasons (such as the poor infrastructure), and election-related spending by the government and the candidates. These concerns, together with the committee’s close interest in the direction of offshore portfolio flows, lead us to see a policy rate hike by the MPC next month.
Consumer price inflation (% chg y/y)

Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
  • The report also tracks inflation by state, with the highest 12.9% y/y in Kaduna in September and the lowest 8.4% in Cross River and 8.8% in Plateau. However, it cautions that household baskets vary across states.



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