FREE

July 2020 Inflation Review - Inflation ascends to two-year high, hits 12.82% y/y in July

Inflation ascends to two-year high, hits 12.82% y/y in July Inflation ascends to two-year high, hits 12.82% y/y in July In July, inflation rose by 26bps to 12.82% y/y, 13bps above our estimate (Vetiva -12.69% y/y) due to the pass-through effect of higher fuel prices and wider exchange rate divergence. In line with the uptick in crude oil prices, the Petroleum Products Pricing Regulatory Agency (PPPRA) raised the pump price of fuel for July by 18.4% from ₦121.50 to ₦143.8. This had a ripple effect on the cost of transportation and commodities, accentuating exchange-rate based pressure following the devaluation of the Naira in July. Thus, food inflation went up by 30bps to a 28-month high of 15.48% y/y (v/s 15.18% y/y in June), while core-inflation fell 11bps lower to 10.10% y/y (v/s 10.21% y/y in June).
Fuel hike impacts all components of the CPI BasketFood inflation sustained its uptrend to 15.48% y/y from 15.18% y/y in June. This was upheld by sustained inflationary surge in both the food & non-alcoholic (+31bps) and tobacco & alcoholic beverages (+15bps) segments to 15.40% and 10.21% respectively.
Core items undergo segment-wide pressure, slightly lower  Core inflation turned out 3bps lower, rising to 10.1% y/y. Although all segments recorded increases on a y/y basis, high pressure points remained the health (11.61%), transport (10.80%) and clothing (10.61%) segments. Most notable is the impact of higher fuel price on housing, water, electricity, gas and other fuel (HWGS) inflation which grew by 11bps in Jul’20 to 7.97% from 7.86% in Jun’20.