The party seems over for disinflation

The latest report from the NBS has headline inflation y/y at 11.1% in July. This is the eighteenth successive slowdown but the monthly decline has again slowed (from 40bps to just 9bps in July). Food price inflation slowed from 13.0% to 12.9% y/y, and the core measure from 10.4% to 10.2%. Our expectation, shared with wire services, was a flat 11.2% y/y for the headline measure.


  • The headline rate rose by 0.8% m/m from January through to April, and has since accelerated to 1.1%-1.2%. The pattern for food prices has been similar but more pronounced: 0.8% to 0.9%, followed by 1.3%-1.6%.

  • Generally we see an easing of food price inflation from July or August, depending on the harvest cycles. We are not sure that the pattern will be repeated in 2018, given the recurring clashes between farmers and herdsmen across many important growing areas. The NBS commentary noted stubbornly high price rises for most components of the food index other than meat.

  • Accordingly, we see a rise in the headline rate to 11.5% y/y in August. In the months ahead, we should see some impact of the expansionary fiscal policy.
Consumer price inflation (% chg y/y)

Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
  • The report also tracks inflation by state, with the highest 13.4% y/y in Kebbi in July and the lowest 8.8% in Plateau. However, it cautions that household baskets vary across states.
  • We feel that we have arrived at the inflection point for inflation, and that hopes of a rate cut by the monetary policy committee (MPC) have been dashed. At its next meeting in late September, it will probably have to choose between another unchanged stance and, conceivably, a hike.

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