Nigeria’s Inflation Prints at 21.91%, Driven by Naira Scarcity, Price of food items.

The Consumer Price Index (CPI)/Headline Inflation/All Item Index

The Consumer Price Index (CPI), which measures inflation, rose by 21.91% Year-on-Year (YoY) in Feb’23, representing the second consecutive acceleration after moderating in December 2022. This is 0.09% higher than the rate recorded in Jan ’23 (21.82%) and 6.21% in Jan ’23 (15.70%).

Also, on a month-on-month (MoM) basis, the Headline inflation Index inched lower to 1.71% in Feb ’23; this is a 0.16% decline from the rate (1.87%) recorded in the previous month (Jan 23). The rise in headline inflation rate was driven mainly by an increase in food items such as Bread.

The Food sub-index rose by 24.35% YoY in Jan ’23 compared to 24.32% in Jan ’23 and 17.11% in Feb ’22; this represents a 0.04% and 7.24% increase compared to Jan ’23 and Feb ’22, respectively. However, on an MoM basis, the food inflation rate moderated to 1.90% in Feb ’23, a 0.18% decrease from 2.08% recorded in Jan ’23. The rise was due to the price appreciation of some food items like Oil & fat, Bread and Cereals, potatoes, Yam & Tubers, Fruits, etc.

The Core Inflation/ The All Items Less Farm Produce

The “All Items less farm produce” or “Core Inflation,” which excludes the prices of volatile agricultural produce, surged by 18.84% YoY in Feb ’23, moderated by 0.32% while accelerating by 4.83% when compared with Jan ’23 (19.16%) and Feb ’22 (14.01%) rates. However, on an MoM basis, the core sub-index decelerated to 1.06% in Feb ’23, against the rate recorded in Jan ’23 (1.82%). The highest increases were recorded in prices of Gas, Passenger transport by Air, road, Liquid Fuel, Fuels, and Lubricants, Personal Transport Equipment, Vehicles Spare Parts, and Solid fuel. 

Outlook: Inflation to Remain Elevated but at a slower pace. 

For the following month, we expect inflation to remain elevated but at a slower pace majorly due to the high base effect. Inflationary pressures in the food sub-index will likely remain elevated due to legacy issues such as insecurity and high logistics costs due to the bad road network in the country would continue to mount pressure on the supply of staple food items.  For the core sub-index, persistent demand for foreign exchange in the I&E window and parallel market will continue to mount inflationary pressures as foreign exchange inflows remain subdued, posing an upside risk to inflation. Also, elevated crude oil and gas prices keep the prices of diesel, kerosene, and jet fuel high would continue to increase the cost of production.