March 2022 CPI Report: Sustained Ascension; Time For Portfolio Replanning
- Headline Inflation Came in at 15.92% YoY in March 2022
In the recently released inflation survey publication of the National Bureau of Statistics (NBS) for the month of March of 2022, it was revealed that prices of goods and services had jumped 15.92% Year on Year (YoY). The report further revealed that price increases were recorded across all Classification of Individual Consumption by Purpose (COICOP). We would like to re-emphasize that the rise in prices (15.92% YoY) over the past year pales in comparison with what was obtainable during the corresponding period between 2020 and 2021. In our previous reports, we had noted that global supply chain disruptions were behind the northward drive of prices last year. A Month on Month (MoM) review of the recent release revealed that there was a bigger surge in price in March 2022, given that prices rose (1.74% MoM), an eleven (11) basis points difference from the 1.63% MoM magnitude of increase recorded in February 2022.
- Food Inflation Surges Amidst Protracted Local Concerns and Global Uncertainties
Recall, that in our previous note on inflation, we had stated that the effect of a Russian invasion in Ukraine would be overarching, given the strategic placement of both countries in the global commodities market. As it stands, the impact is starting to surface across all indices. Firstly, we noted that Nigeria’s food inflation rose (17.20% YoY) in March 2022, reflecting the current surge in Bread and cereals, Potatoes, Yam and Other tuber, Fish, Meat, Oils and fats. Our observations showed that the trajectory is most dictated by the protracted insecurity concerns along the food producing region of Nigeria, the current weather conditions, and the escalation in eastern Europe. Wheat prices for one has moved significantly, and so are other systemically important commodities.
- A Micro view of Price Movement: Time to Repurpose the Portfolio?
Overtime, we have used the National inflation rate to explain portfolio performance. For example, with headline inflation at 15.92% YoY, the negative rate of return for both NT-bills (3.31%) and Bonds (11.02%) closed at 12.43% and 4.9% respectively on the 14th of March 2022. However, given the heightened uncertainties that is shaping the sustained surge in prices, we have opted for a different perspective. The new perspective involves a micro-evaluation of price direction. To consummate the move, we did a survey on price movement on some of the items that an average Nigerian consumes, and overall, we had an average price rise (+35.79% YoY) in the past twelve months. This is important because of the opportunity it provides to see consumer price trend from a personal perspective, which in turn would guide investment decisions much better. A point worthy of note from the survey is that different individuals would have varying lifestyle inflations, a situation that reiterates the need for bespoke investment advisory services.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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