FREE

May 2021 Inflation - Base effects ease pricing pressures

Base effects ease pricing pressures
Headline inflation moderated for the second time in a row to 17.93% y/y (Vetiva: 18.85% y/y). While this seems contrary to anecdotal evidence, we believe the high base effect was the primary driver of the moderation in the headline figure, as the reopening of economy, restoration of supply chains and reopening of the land borders eased pressure on the headline figure. On a month-on-month basis however, headline inflation rose at a faster pace by 1.01% m/m (Apr’21: 0.97% m/m).
Food prices rise at a slower pace Although food inflation eased to 22.28% y/y (Vetiva: 22.78% y/y) from 22.72% y/y in Apr’21, insecurity in food-producing regions continues to take its toll on food prices, as food inflation (May’21: 1.05% m/m) rose at a faster pace month-on-month (Apr’21: 0.99% m/m). The major driver of food inflation remains the food and non-alcoholic beverage segment, which is mostly affected by insecurity, adverse weather conditions, and higher pump prices. Amid the reduction in food inflation, imported food inflation sustained its upward momentum to 16.97% y/y (Apr’21: 16.91% y/y) reflecting the passthrough effects of a weaker Naira and FX restrictions on food imports.