The increases in food prices during the Yuletide may have significantly impacted on the Consumer Price Index, (CPI) in the month of December 2018 as the headline inflation rose by 0.16 percent Year on Year (YoY) to 11.4 percent. Financial analysts have also projected that the ongoing presidential election campaign would put more pressure on the general price level of goods and services in this month leading to further rise in the inflation.
The report released by the Nigeria Bureau of Statistics, NBS, yesterday shows that that headline inflation rate further increased to 11.44 percent YoY, representing 0.16 percent or a 0.16 basis points, bps higher than 11.28 per cent recorded in November 2018. Month on Month, MoM food inflation tapered by 9 bps to 0.81 percent driven by a sharp deceleration in processed and imported food, which neutered slight uptick in farm produce.
Meanwhile, month-on-month core inflation moderated faster by 19 bps to 0.5 percent on account of temperance across Housing, Water, Gas, Electricity, and other Fuel (HWEGF), Health, and Clothing and Footwear sub-components.
The data from the NBS also showed that the composite food index upticked by 26 percent to 13.56 percent in December 2018 from 13.30 percent in November 2018 due to increases in prices of soft drinks, fish, bread and cereals, oils and fats, coffee, tea and cocoa, meat, milk, cheese and egg, vegetables, potatoes, yam and other tubers.
The data revealed that higher prices of food were recorded in Abuja, Bayelsa and Nasarawa States as food inflation in the respective states increased to 16.50 percent, 16.23 percent and 16.15 percent.
According to the inflation report "The urban inflation rate increased by 11.73 percent YoY in December 2018 from 11.61 percent recorded in November 2018, while the rural inflation rate increased by 11.18 percent in December 2018 from 10.99 percent in November 2018.
Commenting analysts at Cordros Capital said: "With minimum wage still hanging in the air, we expect the dual impact of slight uptick in core inflation and faster deceleration in food basket to midwife a reversal in the headline inflation trend in January. For us, on account of a steeper decline in demand for farm produce following the end of festive season, we expect m/m food inflation to moderate slightly by 2bps to 0.79 percent. "However, whilst we expect Foreign Exchange, FX to remain largely range-bound, together with tame energy prices, we see scope for mild uptick in the MoM core inflation (+15bps to 0.65 percent MoM) as election related spending intensifies. Overall, we look for January m/m headline inflation of 0.73 percent, translating to YoY figure of 11.37 percent."
In their comments, analysts at Cowry Asset Limited said: "We expect further upward pressure on general price level of goods and services in January 2019 as Presidential election campaigns intensify."
On the other hand, Analysts at United Capital Limited said: "In 2019, we believe the major factors that will impact the trend of inflation will range from electioneering spending in the early part of the year, expectations of a higher minimum wage, movements of the naira in the FX market and a possible hike in energy tariffs. With no expectation of a swift implementation of the new minimum wage and considering current FX liquidity, we expect pressure on headline inflation to continue to come from the seasonal food inflation sub-index. "Additionally, the level of insecurity in food-producing states will also be a factor to keenly watch as we draw close to elections. In the near term, the impact of spending that trail a typical election period is expected to have a knock-on-effect on headline inflation. Hence, we see a marginal uptick in MoM headline inflation to 0.82 percent, translating to a forecast of 11.46 percent for January 2019, 2bps higher than the December 2018 figure."