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March 2020 Inflation Review - Annual inflation inches higher on anxiety-driven food purchase

Annual inflation inches higher on anxiety-driven food purchase

Nigeria’s consumer inflation inched higher to 12.26% y/y (Vetiva estimate: 12.30% y/y) in Mar’20, data from the National Bureau of Statistics (NBS) showed. This is a faster inflation rise compared to Feb’20 (12.20% y/y) and 11.25% y/y a year ago. However, the pace in annual inflation growth in Mar’20 (6bps) is slower than the 7bps growth recorded in Feb’20. The slower pace in growth is underpinned by a faster rise in food prices, but softened by low energy prices and subdued demand activity.

M/m inflation reflects price moderation in COVID-19 vulnerable sectors

On a monthly basis - save for the furniture, tourism and hospitality components – all inflation indices recorded a faster rise in prices, contributing to a 5bps increase in consumer prices to 0.84% m/m in Mar’20 from 0.79% m/m in Feb’20. This reflects an uptick in aggregate demand in March, compared to February, as consumers stockpiled on food and primary consumption items, in anticipation of a pandemic-induced lockdown.

Outlook for inflation is benign

In the ongoing month, we expect consumer inflation to moderate for the first time since Apr’19, to a year-to-date low of 12.12% y/y. The moderation is likely to be supported by softer food and fuel prices. At the start of the month, the Petroleum Products Pricing Regulatory Agency (PPPRA) announced a further reduction in the pump price of Premium Motor Spirit (PMS) from ₦125.00 in Mar’20 to ₦123.50 in Apr’20. This, in addition to a lockdown-induced slowing in aggregate demand will likely contribute to the moderation of the headline inflation in Apr’20.