October Inflation: Again, Border closure sends headline inflation skywards
- As anticipated, inflation for the month of October came in higher to 11.61% YoY, +37bps increase from prior month (September: 11.24% YoY) and 5bps shy of our estimate of 11.56%. This marks the second consecutive increase in inflation since the border closure which led to elevated food prices despite the main harvest season which started in October. We believe the impact of the border closure outweighed the influx of harvest for the month. Specifically, food inflation jumped by 57bps to 14.07% with Farm produce (+87bps to 14.77% YoY) leading the pack. Stripping out volatile food prices, core inflation came in 6bps lower to 8.88% YoY owing to subdued energy prices.
- Month-on-month numbers showed similar trend, with headline inflation expanding by 3bps to 1.07% MoM (4bps shy of our estimate: 1.03% MoM) anchored mainly on food inflation. Again, increased food prices owing to the above stated reason drove food inflation 2bps higher to 1.32% MoM, with farm produce expanding by 22bps to 1.44% MoM during the month under review. Core inflation on the other hand, declined 14bps to 0.74% MoM due to curtailed energy prices.
- While the threat to higher core inflation remain minimal due to continued stability in energy prices, we expect the pressure on food prices to remain. Though we retain our view of a promising harvest this season, passthrough from the border closure would remain evident on food prices. On that note, we expect consumer prices to maintain its upward trajectory with headline inflation for the month of November at 11.81% YoY and month-on-month inflation of 0.98%. Against this backdrop, average inflation for 2019 should print at 11.40% YoY (FY 18: 12.2% YoY).
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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