Dear subscriber,

Nigeria’s headline inflation declined further by 1.3% to 23.18% from 24.48% in January, (new methodology), consistent with analysts’ consensus of declining inflation. What is more important is the magnitude of the change in prices. On a month-on-month basis, headline inflation in February stood at 2.04% (annualized at 27.42%). The disinflation trend resulted from a combination of factors, including a reduction in aggregate demand, falling fuel costs, lower logistics costs, and relative exchange rate stability.

The food basket declined to 23.51% from 26.1%, driven by seasonality. The falling prices of items such as yam tubers, potatoes, maize flour, cassava, and beans led to this decline. Meanwhile, the non-food basket increased to 22.06% from 21.9%, due to entrenched challenges, electricity costs, medicals, rents, etc.

No victory dance yet – Inflation’s still sneaking around

It is noteworthy that core inflation, which is inflation excluding seasonalities and energy—rose by 0.5% to 23.1% from 22.6%. This implies that the fundamental problem with inflation in Nigeria remains structural. Hence, the solution is not merely about interest rate movements or policy changes, it is primarily about increasing output. Until output begins to increase, core inflation will remain persistent.

This underscores the CBN’s cautious stance in concluding that inflation is now tamed. As a result, it is too early to forecast whether the Apex Bank will opt to hold or cut the policy rate in May 2025.

In the download and link below, the FDC Think Tank shares its thoughts on the impact of February’s inflation numbers on the economy.

Enjoy your read…