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November Inflation Review - Nigeria inflation flat as core inflation eases

NIGERIA INFLATION                                                                      

Nigeria inflation flat as core inflation eases                                                                       

Nigeria’s inflation came in flat m/m at 11.3% y/y, also in line with Consensus estimate albeit behind Vetiva forecast of 11.4% y/y. Month-on-month (m/m) inflation inched up from 0.7% to 0.8%, but we note that this level is still relatively manageable in the long run as it translates to 10% annual inflation. The rise in m/m inflation was driven by food prices, which were up 0.9% m/m (October: 0.8% m/m) and 13.3% y/y (October: 13.3% y/y). Meanwhile, Core inflation printed at 0.7% m/m (October: 0.8% m/m) and 9.8% y/y (October: 9.9% y/y).                                                                   

Given the improvement in food and core inflation recorded over the course of the year, we would have been cautiously optimistic about inflation heading into 2019. However, this outlook is clouded by our expectations of a minimum wage hike sometime and likely naira weakening later in 2019. As a result, our forecast for 2019 average inflation in our base scenario is 12.6%, above projected 2018 average of 12.2% y/y (December: 11.6% y/y). Our bear and bull forecasts for 2019 are 13.4% y/y and 10.3% y/y respectively.