The latest inflation report from the NBS shows headline inflation y/y at 15.4% in December. This was the eleventh successive monthly slowdown, and by a welcome 53bps on this occasion. The driver was a steep decline in food price inflation from 20.3% to 19.4% y/y. Our expectation, shared with wire service polls of analysts, was 16.0% y/y on the basis of higher seasonal demand.
While the trend in the core measure has broadly reflected the softening of demand in the now-ended recession, food prices have remained stubbornly high because of supply factors, notably insecurity and a pick-up in food exports. We suspect, in the absence of any data, that some harvests have disappointed.
The NBS commentary isolates the large price increases for lubricants and fuel for personal transport, for solid fuels and for air passenger transport. This is consistent with the anecdotal evidence of fuel scarcity, notably of gasoline/petrol, in the holiday season.
The bureau also tracks inflation by state, with the highest 21.9% y/y in Bauchi in December and the lowest 10.0% in Kogi. However, it cautions that household baskets vary across states.
We see the headline rate falling again to 15.2% y/y in January. Base effects will be positive through to June/July, when we see the rate just above 11.0%.
The monetary policy committee is very unlikely to hold its scheduled meeting next week for what we will charitably call “procedural” reasons, not that we expected a change in stance.