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Nigeria January Inflation 2021 - Off to a slow start

NIGERIA INFLATION
Off to a weak start
Consumers’ purchasing power continued to be eroded as headline inflation rose by 71bps to 16.47% y/y (Vetiva:16.73% y/y) in the first month of the year, no thanks to the lingering impacts of the pandemic. Commodity prices continue to take a beating from higher PMS prices and currency challenges, despite the suspension of electricity tariff review and the reopening of the borders.
Supply constraints chief among food triggers Food inflation maintained its 3-year long ascent to 20.57% y/y (Vetiva: 20.95% y/y), propelled by the prolonged impact of supply chain disruptions, conflict in food-producing areas and higher distribution costs. The non-alcoholic segment, which captures necessities spiked by 20.45% y/y (Dec’20: 19.45% y/y) experiencing greater pressures than the alcoholic segment, which rose by 11.61% y/y (Dec’20: 11.28% y/y).
Longest streak in a decade In the month of February, we expect inflation to rise to 17.12% y/y, being the seventeenth consecutive month of higher inflation. This represents the longest inflationary run in the past decade. While waning border-closure effects stoked prices in Feb’20, the economy had not experienced pandemic disruptions, currency adjustments and energy reforms. With these underlying structural changes crawling into the new year, we expect headline inflation to sustain its run into Feb’21.