The latest inflation report from the NBS shows the ninth successive acceleration in the headline rate, to 18.3% y/y in October from 17.9% the previous month. There was an increase in the core measure to 18.1% y/y from 16.6%. The NBS commentary again singled out soaring energy costs. We note that housing, water, electricity, gas and other fuel prices increased by 32.8% y/y in October, compared with 26.3% the previous month; they account for 12.7% of the index.
Education costs also stuck out as one of the primary drivers behind the acceleration in October’s headline rate. Costs within the segment rose by 19.2% y/y compared with 18.6% in September. This component has a 4.0% weighting.
After a steady slowdown for four successive month, the m/m increase was 0.8% (unchanged from the rate recorded last month).
There was an increase in food measures to 17.1% y/y from 16.6% the previous month. The rise in the index was attributed to price increases in bread, cereal, fish and meat. However, we note that fruits recorded the slowest pace of increase.
Although fx sourcing challenges still linger, the naira depreciation has slowed since the large adjustment in June.
Sources: NBS; FBNQuest Research
At its last meeting the MPC left its stance unchanged as the committee opted to assess the impact of the hike in July. The communique suggests that it has abandoned attempts to lure offshore investors back with hikes.
Given this surge in inflation, any decision tilting towards a policy rate cut may be difficult. If the clampdown by the authorities on the black market proves effective, inflationary pressures could ease slightly, paving the way for cuts.
