Rising Food and Energy Prices Drive Nigeria’s Inflation to 22.79% in June’23

• Food and non-alcoholic beverages major contributors to inflation with (11.81%),
• Followed by housing, water, electricity, gas, and other fuel with 3.81%,
• While at the least of the contributors was communication with 0.15%

Headline Inflation

Rising prices of food items, occasioned by petrol subsidy removal, among others, have driven the rate of inflation to an all-time high, 22.79% compared with 22.41% in May’23.

According to the latest Consumer Price Index (CPI), report by the National Bureau of Statistics (NBS), Nigeria’s inflation rate has increased for the sixth consecutive month, maintaining the highest rate in 19 years. Compared to the corresponding period of 2022, inflation increased by 4.19% from 18.60% recorded in June 2022. On a month-on-month basis, the Headline inflation rate in June 2023 was 2.13%, this was 0.19% points higher than the rate recorded in May 2023 (1.94%). This means that in June 2023, on average, the general price level was 0.19% higher relative to May 2023.

Food Inflation rose to 25.25% in June

The Food inflation rate in June 2023 was 25.25% on a year-on-year basis; this was 4.65% points higher relative to the rate recorded in June 2022 (20.60%). The rise in Food inflation on a year-on-year basis was caused by increases in prices of Oil and fat, Bread and cereals, Fish, Potatoes, Yam and other tubers, Fruits, Meat, Vegetable, Milk, Cheese, and Eggs. On a month-on-month basis, the Food inflation rate in June 2023 was 2.40%, this was 0.21% points higher compared to the rate recorded in May 2023 (2.19%). The average annual rate of Food inflation for the twelve months ending June 2023 over the previous twelve-month average was 24.03%, this was a 5.41% points increase from the average annual rate of change recorded in June 2022 (18.62%)

Core Inflation rose by 4.53% YoY

The “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 20.27% in June 2023 on a year-on-year basis; up by 4.53% when compared to the 15.75% recorded in June 2022. The highest increases were recorded in prices of Passenger Transport by Air, Gas, Vehicles Spare Parts, Liquid Fuel, Fuels and Lubricants for Personal Transport Equipment, Medical Services, Passenger Transport by Road etc. On a month-on-month basis, the Core Inflation rate was 1.74% in June 2023. It stood at 1.81% in May 2023, down by 0.07%. The average twelve months annual inflation rate was 18.71% for the twelve months ending June 2023; this was 4.65% points higher than the 14.06% recorded in June 2022.

Inflation Outlook for the Month of July’23

Despite anticipated rates hike by the CBN (MPC meets in July) to further contend with rising inflation; increasing energy prices as a result of OPEC+, Russia cut, global inflationary pressure, and food shortages, we expect the inflation rate to tick higher in the month of July, 2023, driven by rising food and transportation prices as the major driver of inflation in Nigeria. Food prices in the month of July is likely to tick higher as a result of food shortages occasioned by planting season and non-renewal of the Russa-Ukraine Black Seal Deal, the impact of petrol subsidy removal, and exchange rate liberalization. While transportation prices would accelerate on the back of increased petrol pump prices. In the coming MPC meeting in July, we expect rate to be reviewed upward by at least 25bps to further contend with rising inflation.