Nigeria’s headline inflation is projected to inch up 0.01% to 11.38% in the month of May. This will be due to a fall in output, evidenced by the sharp drop (16.24%) in the output sub-index of the PMI to 49 points in the month of May. Planting season shortages contributed to an increase in the price of some commodities like tomatoes, pepper and yam. Notwithstanding, the price of rice and melon declined while garri was flat. The money supply effect was muted as M2 growth (annualized at 5.54%) is still below the CBN’s target of 12.99%. Even though the average opening position of the banking system increased to N289.48bn, its impact was limited by the CBN’s aggressive liquidity mop-up through OMO activities. OMO bills issued increased by 114.6% to N1.13trn.
We are also anticipating a 0.16% rise in the month-on-month inflation to 1.1% (14.04% annualized) in the month of May. Even though the uptick in the headline inflation is expected to be marginal, rising monthly inflation suggests intensification of the inflationary pressures in the months ahead especially with the minimum wage implementation.
In the attached bulletin, the FDC Think Tank shares its estimates for inflation in the month of May and likely policy reactions.
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