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November Inflation Review - Inflation Déjà vu in November

Inflation Déjà vu in November
Nigeria’s inflation statistics for November came in very close to October readings, underscoring the current stickiness of inflation. Headline inflation registered at 15.9% y/y, the same as in October and slight above Vetiva and Consensus estimates of 15.8% y/y. Similarly, Food Inflation registered at 20.3% y/y and 0.88% m/m in November, compared to 20.3% y/y and 0.85% m/m in October. Finally, Core Inflation registered at 12.2% y/y and 0.77% m/m in November, compared to 12.1% y/y and 0.76% m/m in October.

And beyond the usual challenges with food and energy prices, Nigeria’s underlying inflation is remarkably sticky. Annual Inflation (excl. food and energy prices) between August and November reads as follows: 12.70%, 12.71%, 12.73%, 12.72%.

Ongoing stability in the exchange rate and food prices are significant positives for Nigeria’s inflation moving forward. On the other hand, whilst high global oil prices support Nigeria’s fiscal and foreign exchange position, they put pressure on petroleum product prices in the country. Nevertheless, we expect regulation and Nigerian National Petroleum Corporation interventions to cap the impact of relatively strong global oil prices. Meanwhile, we do not consider electricity tariff hikes to be politically feasible at this point and do not account for the prospect in our forecasts. Finally, any effect of increased festive spending should be countered by base effects. Moving forward, we are keeping an eye out on the effect of any monetary easing by the apex bank on Nigeria’s pricing environment. Overall, we expect inflation of 15.7% y/y in December (Previous: 15.6% y/y), translating to 2017 average inflation of 16.7% (2016: 15.6%). With the inflation outlook little changed, we do not expect the apex bank to alter its near-term monetary course.