Dear subscriber,

The NBS is scheduled to publish its inflation report for May next week (June 16th). Our time series model and a survey of major commodity markets in the Lagos Metropolis indicate that official headline inflation is likely to slow by 0.56% to 23.15% from 23.71%. Other inflation sub-indices are also expected to move in a similar direction – downward.

Food inflation is projected to decline to 20.73% from 21.26%, while core inflation is expected to ease to 22.85% from 23.39%.

The projected moderation in prices can largely be attributed to stability in the forex market and a reduction in diesel and PMS prices. In May, diesel and PMS prices fell by 4.8% to ₦1,000/litre and 1.7% to ₦875/litre, respectively. Whilst the exchange rate was relatively stable, trading between ₦1,608–₦1,630/$.

Mokwa flooding – A spoiler for inflation relief?

If the disinflation trend continues into July, the likelihood of a rate cut by the MPC will increase. However, recent developments – heightened insecurity in Benue and flooding in Mokwa, both major food-producing states, could dampen this outlook by aggravating food inflation.

In the link below, the FDC Think Tank shares its estimates for May inflation and likely policy reactions.

Do enjoy your read…