The Consumer Price Index (CPI)/Headline Inflation/All Item Index
The Consumer Price Index (CPI), which measures inflation, rose by 16.82% Year-on-Year (YoY) in Apr’22. This is 0.90% higher than the rate recorded in Mar’22 (15.92%) but 1.30% lower than Apr’21 (18.12%). The headline inflation spiraled upward, in line with previous month’s hike. The increase recorded in Apr ’22 was on the back of price acceleration in the food and core subindices, representing the highest rate recorded since Aug`21.
Also, on a month-on-month (MoM) basis, the Headline Index increased to 1.76% in Apr’22; this is a 0.02% increase from the rate (1.74%) recorded in the previous month (Mar’22). The hike in monthly headline inflation (Core and Food Subindices) mirrors the inflationary pressures faced globally, exacerbated by the ongoing Eastern Europe crises which has given rise to commodities and energy prices.
The Food Inflation
The Food sub-index rose by 18.37% YoY in Apr’22 compared to 17.20% in Mar’22 and 22.72% in Apr’21. Also, on a MoM basis, the food inflation increased to 2.00% in Apr’22, up by 0.01% point from 1.99% recorded in Mar’22. The food inflation was largely driven by the pass-through effect of supply chain disruption.
This rise in the food index was caused by increases in the prices of Bread and cereals, Food products n.e.c, Potatoes, yam, and other tubers, Wine, Fish, Meat, and Oils
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, stood at 14.18% YoY in Apr’22, rising by 0.27% and 1.44% when compared with Mar’22 (13.91%) and Apr’21 (12.74%) rates. Similarly, on a MoM basis, the core sub-index increased to 1.22% in Apr’22, up by 0.24% compared with 0.98% recorded in Mar’22.
The highest increases were recorded in prices of Gas, Liquide fuel, Cleaning, repair and hire of clothing, Clothing materials, other articles of clothing, and clothing accessories.
The inflation rate for the month skyrocketed in line with our expectation of a sustained uptick in inflation, exacerbated by rising oil prices (elevated gas prices) and supply chain bottlenecks (crop supply disruption) in addition to the immateriality of the base effect (if any), giving rise to the food and core subindices. A shortfall in global oil supply was witnessed during the month under review, driven majorly by the Russia-Ukraine crisis and some oil-producing countries’ inability to meet their production quotas (e.g., Nigeria). While oil demand was hampered for most of the month, given lockdown measures imposed in some parts of China alongside the release of 120 million barrels of oil from the Strategic Oil reserves of the U.S. and others as efforts of the International Energy Agency to support supply, the impact of the two major factors (Russian-Ukrainian crisis and inability to meet production quotas by oil-producing countries) outweigh the former, resulting in sustained elevated oil prices, which filtered into the core index, driving prices MoM and YoY. Similarly, festive induced demand, rising insecurity in the country’s food region, and crop supply disruptions (wheat, maize, flour) gave rise to the food sub-index also inching higher month on month.
For the following month, we expect a similar trajectory in inflation rate on both the food and core segments, given that the underlining drivers still persist. Nigeria’s monetary policy committee is billed to meet next week, and the top of the agenda will be taming inflation while supporting growth. However, we opine that a hawkish or dovish stance could be immaterial in containing the rising inflation. Notably, due to rising inflation in developed and sub-Saharan African economies, Nigeria is also at risk of imported inflation being an import-dependent economy.