Nigerian Inflation - Base effect to bow out as food pressures dictate CPI tone
- Nigeria’s inflation decelerated for the fourth consecutive month in May 2017 to 16.25% YoY as core inflation dropped sharply in line with our earlier surmise relating to pass-through from high base effect from elevated fuel prices in 2016. However, food inflation remained at an elevated 19.3% YoY in the review month as structural setbacks, such as higher transportation cost, offset potential gains from an appreciating naira.
- Going forward, the Ramadan-associated strong demand for cereals should leave pressures on cereal prices largely intact in June. Thus, aided by still elevated transportation cost which have also limited gains from an appreciating naira, we remain bearish on food inflation despite ongoing green harvest in the Southern part of the country. That said, the cumulative benefits of sustained FX policy gains appear to have finally caught up with energy prices given the subdued MoM growth in prices of PMS and cooking gas as well as the decline in diesel prices in recent readings. We expect this to lead to a moderation in monthly core inflation reading in June—albeit expected to have a relatively pale influence on YoY reading compared to that from the just ended high base effect from 2016. Overall, our expectations across the core and food inflation buckets should translate to an unchanged headline reading of 16.25% YoY in June 2017.​
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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