Dear Subscriber,

Headline inflation surged by 1.18% to 33.88% in October from 32.70%, marking the highest level since July 2024. The rate of increase was far higher than analysts’ expectations. The consensus opinion was 33.4%. The major reason for this astronomical increase was a combination of factors. The most prominent catalyst of inflation this time was the energy costs. In the month of October gasoline price increased by 14% cumulatively to N1,030/litre. The inflation data showed that the prices of food and non-alcoholic beverages contributed 17.55% to headline inflation.

Both food and core inflation moved in tandem with headline inflation. Food inflation jumped by 1.39% to 39.16%, while core inflation rose to 28.37%. Suggesting that Nigeria’s inflation is more structural than transient. Also noteworthy is that monthly inflation (a more immediate and relevant picture of current economic realities) increased to 2.64% (36.56% annualized) from 2.52%.

CBN may have to tighten again

Nigeria’s inflation continues to rise despite the CBN’s effort to increase interest rates and impose money supply constraints. This implies that inflation is driven by output constraints rather than money supply saturation. Hence, October’s data sets the stage for a pivotal policy response. More likely than not, CBN is expected to increase interest rates again.

In the link below, the FDC Think-Tank analyzes the inflation data for October and likely impact on policy and markets.

Enjoy your read!