More good inflation news but who is watching?

The latest report from the NBS has headline inflation y/y at 11.6% in May. This is the sixteenth successive monthly slowdown, and by a healthy 87bps on this occasion. The principal driver was a decline in food price inflation from 14.8% to 13.5% y/y. Core inflation also slowed, from 10.9% to 10.7% y/y. Our expectation, shared with wire services, was 11.3% y/y for the headline measure.                                                                                                    

  • Food price inflation y/y has now slowed in large steps for six successive months. This is not a response to the actions of the monetary policy committee (MPC), which has often observed that supply-side factors beyond its control have been responsible for the stubbornness of food price inflation.
  • The bureau also tracks inflation by state, with the highest 14.7% y/y in Kebbi in May and the lowest 8.9% in Kwara. However, it cautions that household baskets vary across states.

Sources: National Bureau of Statistics (NBS); FBNQuest Research


  • We see the headline rate falling again to 10.8% y/y in June.
  • The MPC next meets after the release of the June inflation report. We have been calling for a rate cut on the basis of the disinflation trends, for which the committee would normally take some credit, and still hope for a cut of 50bps by year-end. That said, the committee’s last communique barely acknowledged the steep decline in headline inflation, and concentrated on the negative impact of the late passage of the 2018 budget (still awaited) and its expansionary stance.

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