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December 2019 Inflation Review - December inflation reaches a 20-month high, at 11.98% y/y

December 2019 Inflation
December inflation reaches a 20-month high, at 11.98% y/y
Nigeria’s headline inflation increased to 11.98% y/y in December, in line with our forecast, from 11.85% y/y in November, driven by both higher food and non-food prices, data from the statistics bureau (NBS) revealed. Food prices were up 14.67% (November: 14.48% y/y) from a year ago while the prices of non-food items were higher by 9.33% y/y in the review month (November: 8.99% y/y).

Continued border closure pressures annual food inflation
Food prices have been on a steady rise since August 2019 when the government implemented its anti-smuggling land-border closure to abate the illegal importation of rice and other goods. Although the timing of the border closure seemed reasonable as it was implemented shortly before the commencement of the harvest season, the resulting food demand pressure could not be subdued by the effect of the harvest season.

Short-term inflationary risks persist
Over the next 12-months, we anticipate a mark-up on average inflation as inflationary pressures intensify. In addition to the pass-through impact of the continued closure of the border on food prices, we believe the upward review of electricity tariffs will mount upside pressure on the core-index. We also believe the upward review of VAT will reinforce the pressures on consumer prices and feed into inflation. Hence, we expect an increase in inflation in 2020 to 12.54% y/y (average) from 11.41% y/y (average) in 2019.