April 12, 2019

Subdued pockets and inflationary pressure

Although Nigeria’s economy has posted growth in the past five quarters, household wallets have not necessarily been re-built and so purchasing power remains low. In 2018, GDP per capita was US$1,930. However, this could be misleading given the skewed wealth distribution in the country. The average Nigerian’s spending capacity is US$50 per month. Inflationary pressure has also contributed to subdued spending. Headline inflation has remained at double-digits since February 2016. Meanwhile, salaries and wages have not grown in inflation-adjusted terms.


  • Based on data from the National Bureau of Statistics (NBS), food inflation rate has been considerably high since mid-2016 when it hit 20% y/y. Its latest reading (for February) shows y/y growth of 13.47%. Although there has been a slowdown in the rate, this has not been reflected across prices of food products in markets.
  • As for imported food prices, there was a spike to 20.0% y/y in June 2016 which was mainly due to the fx pass-through effect on the back of the oil-price slide in 2014. Since then, imported food price inflation has slowed to 15.6% y/y. The CBN’s fx reforms have assisted with the slowdown.
  • The transport segment, which accounts for 6.5% of the total inflation basket, shows an inflationary price increase of 0.7% m/m in February 2019 (unchanged from the previous month) and 9.6% y/y compared with 9.8% recorded in January. Transportation costs feed into spending patterns for most Nigerians.


Consumer price inflation, Headline (y/y; % chg)

Sources: NBS; FBNQuest Capital Research


  • As for education and health, inflationary price increases were 9.7% y/y and 9.6% y/y respectively in February. The increases in these sectors have been mirrored in school fees hike in some private schools as well as increased cost of medical services.
  • To an extent, the recently adjusted national minimum wage (for the public sector) should help rebuild household pockets and boost spending. It is likely that this could result in an upward trend for headline inflation. For some companies within the private sector, a relatively stable business environment should support inflation-adjusted salaries.