Dear Subscriber,

Headline inflation for December 2023 accelerated to a 27-year high of 28.92%. This is 0.72% higher than the 28.20% reported in November. The stubbornly high inflation is primarily due to a combination of factors, not the least being the substantial exchange rate depreciation (38.84%), excessive money supply growth (39.33%), and a massive increase in transportation costs. The reduction of PMS subsidy in May and heightened insecurity in the food belt have driven up the logistics costs of food commodities in the country.

More worrying is that core inflation (inflation less seasonality and energy costs) rose by 0.68% to 23.06% after a slight decline in November 2023 (22.38%). This is likely to force the hands of the monetary policy authorities to be more aggressive in the management of money supply in the near term.

M3 growth is a major propellant of inflation

With money supply growth at 39% and GDP growth at 2.54% (Q3’23), it is no surprise that inflationary pressure in Nigeria remains potent. Inflation in Nigeria has been further stoked by the surge in diesel price, which spiked by 68.75% to N1,080/litre from N640/litre in May 2023. The newly commissioned Dangote Refinery Complex is bound to increase the supply of diesel with a marginal fall in price. As the MPC reconvenes in the next few weeks, investors are expecting a hike of 100bps in the MPR.

In the download and link, the FDC Think Tank analyzes the December inflation numbers and the impact on businesses and the economy.

Do enjoy your read!