EUR 117.94 For Business Accounts Only

Breakfast Report - 16th May 2016

​The latest Consumer Price Index published by the Nigerian Bureau of Statistics showed a faster acceleration in April Headline inflation to 13.72% y/y (March:12.77%), the highest figure recorded since June 2010. This was driven by a quickening in both core and food inflation, reflecting the pass-through effects of the persistent fuel shortages in the Month and sustained tightness in foreign exchange supply. Following a 16.33% y/y acceleration in Imported food prices, Food inflation surged to the highest in over 5 years at 13.19% (March: 12.74%). Similarly, Core inflation rose to a 39-month high of 13.35% which was driven majorly by a jump in the Transport index amidst tight fuel supply (average pump prices in April: N162.82/litre). We believe the higher inflation rate could mean the MPC would move to hike rates further at its meeting on 23rd and 24th of May. We continue to re-iterate that tightening may be of minimal impact given the cost push factors associated with inflation.

The Nigerian Government announced Wednesday, that it is liberalising the downstream market to address the persistent fuel shortages that has rocked the country for the past year. The new framework recommends retail petrol price at a band of N135 – N145 per litre (a 56% - 68% hike from its previous price at N86.50), and any Nigerian entity is free to import the product subject to existing quality specifications and other guidelines issued by regulatory agencies. The government noted that challenges with procuring FX significantly affected marketers’ ability to import petrol in the past year. Whilst the liberalisation of the market is a positive development and big step toward full deregulation of the sector, we express worries about the current FX framework undermining this effort.

Nigerian equities closed the past week with a bullish bias. Notably, investors looked beyond oil production cuts from militant attacks on major pipelines as the signing of the signing of the 2016 budget and the liberalization of the Downstream Oil & Gas sector provided catalysts for gains. The NSE ASI climbed 288bps w/w, buoyed by a sizeable day gain Friday (+223bps), moderating year to date losses to 7.7%.