Another sharp downward leg in inflation

The latest report from the NBS has headline inflation y/y at 13.3% in March. This is the fourteenth successive monthly slowdown, and by a healthy 99bps on this occasion. The driver was a decline in food price inflation from 17.6% to 16.1% y/y. Core inflation also slowed, from 11.7% to 11.2% y/y. Our expectation, shared with wire services, was 13.6% y/y for the headline measure.

  • Food price inflation y/y has now slowed in large steps for four successive months. This is not a response to the actions of the monetary policy committee (MPC), which has often noted that supply-side factors beyond its control were responsible for the stubbornness of food price inflation.
  • Imported food price inflation m/m has been sticky since late last year. Since the CBN’s policies have brought fx rate stability, we assume that the cause has been the higher US dollar price of the products.
  • The bureau also tracks inflation by state, with the highest 16.4% y/y in Bauchi in March and the lowest 10.3% in Kwara. However, it cautions that household baskets vary across states.

Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
  • We see the headline rate falling again to 12.5% y/y in April. Base effects will be positive through to June/July, when we see the rate at or a little below 11.0%.
  • The MPC next meets after the release of the April report. We jumped the gun ahead of the meeting earlier this month in calling for easing but next time around, if our forecast for April is reasonably accurate, we would expect a rate cut of up to 100bps.

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