According to the National Bureau of Statistics, headline inflation fell to 18.12% y/y (Vetiva: 18.92%). This came as a positive surprise, and even more surprising is that the slight 5bps y/y moderation was driven by a decline in food inflation. Thus, on a month-on-month basis, the Consumer Price Index recorded its slowest rise (0.97% m/m) since April 2020. 

High-base drives food inflation lower
For the first time since the closure of the borders in Aug’19, food inflation moderated. We believe the slight moderation to 22.72% y/y (Vetiva: 23.74% y/y) was as a result of the high base effect. On a month-on-month basis, food inflation rose at a slower pace (Apr’21: 0.99% m/m) despite the Ramadan fast and Easter celebrations. Thus, we believe the slowdown in food inflation was driven by demand frontload, ahead of the festive season, as illustrated by the unusual rise in Mar’21 m/m food inflation numbers (Mar’21: 1.90% m/m) and the slowdown in non-alcoholic food inflation -which captures food and fruits- during the month (Apr’21: 22.59% y/y). Imported food inflation remained on the uptrend at 16.91% y/y reflecting the impact of restrictive FX policies and the underlying weakness in the value of the Naira.

Low base effect drives core inflation
Core inflation, which measures the rate of change in non-edible products, rose to 12.74% y/y (Vetiva: 12.70% y/y) as weaker exchange rates and higher logistics costs passthrough to commodity prices. The month of April was the eleventh time all non-food segments of the Consumer Price Index recorded a simultaneous y/y rise in inflation due to the low base effect from the downward adjustment of pump prices in Apr’20.