Nigeria | Economy | Headline inflation rate moderates to 12.48% in April

inflation

15 May Nigeria | Economy | Headline inflation rate moderates to 12.48% in April

NIGERIA    |    Economy    |    Inflation  |    15-Apr-2018    |    Elixir Research

Dear Valued Investor,

Headline inflation rate slows 12.48% in April 2018 from 13.34% y/y in March 2018

The National Bureau of Statistics this morning published the April 2018 Inflation data, which showed continued moderation in the rate of increases in the consumer price index by 12.48% year-on-year (y/y), from 13.34% y/y in March. Month-on-month (m/m), the increase in the headline inflation rate was somewhat muted at 0.83%, down 0.01% from the rate recorded in March. This marks the 15th consecutive slowdown in inflation (disinflation).

Food inflation rose by 14.8% y/y, 1.28% slower than the 16.08% y/y recorded in March, while the m/m trend was somewhat flat at 0.91% compared with 0.90% in March.

Core inflation rate increased by 10.90% y/y, down by 0.26% from 11.20% in March. However, the m/m reading of 0.87% showed a higher inflationary pressure as it rose faster than the 0.84% reported in March.

Implication
Inflation continues to benefit from the high base effect in 2017 and much more muted increases in the prices of food generally. The continued slowdown in the rate of inflation is positive for the economy, corporate earnings, and general sentiments, though this does not translate into higher purchasing power.

The continued slowdown supports the call for an early reduction in the monetary policy rate (MPR) from 14%, though we think the MPR should be maintained at the current level since market yields have been successfully lowered using other monetary tools. The need to maintain FX stability cannot be overemphasized. More still, the weak feedforward loop between an MPR cut and reduction in lending rates would mute the benefit of a policy rate cut. The next MPC meeting is scheduled to hold 21st – 22nd May 2018.

The outlook for inflation is positive given that we expect further compression as we progress through the rest of the year. We see inflation moderating to about 11%  but expect fixed income yields to rise by about 100 – 300 basis points as foreign investors exit the market against the backdrop of higher U.S. interest rate and rising political concerns ahead of the 2019 election.

Warm Regards,