The latest report from the NBS shows the twelfth successive acceleration in headline inflation, to 18.7% y/y in January from 18.6% the previous month. The rounding masks an increase of 17bps. Core inflation y/y eased to 17.9% from 18.1%. In contrast, food inflation picked up from 17.4% y/y to 17.8%. The bureau’s commentary notes higher prices for all staples as well as wine and spirits, clothing, motor cars and maintenance, and passenger transport by road.
Within core inflation, prices of housing, water, electricity, gas and other fuels increased by 27.2% y/y in January, fractionally lower than the previous month. Fuel prices were probably the main culprit.
The trend of headline inflation m/m has broadly declined since May. January’s 1.0% compared with 1.1% in December on the back of squeezed household demand.
Real yields for liquid FGN bonds in the middle of the curve are currently up to -260bps (negative).
Sources: National Bureau of Statistics (NBS); FBNQuest Research
Effective the February report, we expect headline inflation y/y to ease on positive base effects. This declining trend should result in a headline rate in very low double digits in December, subject to whatever exchange-rate reforms are introduced (and when). Our call is that the MPC will start to cut its policy rate in line with easing inflation.
Our more alert readers will have noticed that the headline rate y/y in January was higher than that of its constituent parts (food and non-food). We have therefore to share the NBS health warning that processed foods are elements of both parts.