Inflation underpinned by supply-side factors

Headline inflation has remained within a range of 11.0% to 11.5% y/y since June 2018. In March the rate declined by a further 6bps to 11.3% y/y. Food price inflation dropped by 2bps to 13.5% y/y while the core measure fell more rapidly, from 9.8% to 9.5% y/y. Our expectation, shared with the wire services, was 11.4% y/y for the headline measure.


  • Given still subdued household demand and exchange-rate stability for close to two years, we might have expected that the rate would decline more sharply. Yet, as the monetary policy committee (MPC) never tires of reminding its audience, the headline rate is stuck within this range on account of well documented, supply-side factors.
  • The NBS also tracks inflation by state, with the highest 1.9% m/m in Kogi and the lowest 0.1% in Enugu. It adds the caveat that household baskets vary across states due to different consumption expenditure patterns. Kogi’s food price inflation of 3.0% m/m was the highest while Bayelsa experienced food price deflation.


Consumer price inflation (y/y; % chg)

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


  • The agreed increase in the national minimum wage will surely provide some boost to spending (and inflation). The timing of its introduction is uncertain, and it is said that employees earning above the minimum will not receive the full adjustment to maintain their differentials. It is incorporated in the FGN’s projection of personnel spending of N2.45trn in its 2019 budget proposals.
  • For April we expect an unchanged headline rate of 11.3% y/y. The impact of both election-related spending and the FGN’s expansionary fiscal stance have seemingly been overstated.

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