Headline inflation up again in January
Nigeria’s headline inflation crossed the 12% threshold in January, increasing at a faster pace (0.15%) than anticipated to 12.13%. This marks the 5th consecutive monthly increase and a 21-month high. More disturbing is the fact that the month-on-month inflation, which is a better reflection of market realities, bucked its 2-month declining trend. This suggests that the impact of other inflation inducing factors that have been benign are becoming more potent. This will be a major concern for the MPC at its next meeting on March 23/24.
Inflationary pressures likely to heighten in subsequent months
We anticipate a buildup in inflationary pressures in the coming months due to higher logistics costs, the implementation of the new VAT rate (7.5%) and the commencement of cost reflective electricity tariff. The IMF in its Article IV report, revised Nigeria’s 2020 growth forecast to 2.0% from 2.5% and hinted at the possibility of inflation picking up in subsequent months.
In the slides, the FDC Think-Tank analyzes the inflation data for January and likely impact on policy and markets.
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