Dear Subscriber,

After two months of decline, Nigeria’s headline inflation reversed itself. This aligns with analysts’ forecasts that inflation in September will rise. Headline inflation increased by 0.55% to 32.70% from 32.15%. All other parameters except core inflation moved in line with the headline inflation. This trend is expected to continue for the next two to three months due to increased PMS prices and the demand for Christmas. More than anything else, the failure of the import duty waiver to ameliorate prices.

Food inflation climbed to 37.77% from 37,52%, driven by increased costs of inputs like feed and transportation, which are heavily influenced by fuel prices. The month-on-month index increased alongside the headline inflation, rising to 2.52% (32.24% annualized) from 2.22%. Core inflation, which excludes volatile food and energy items, edged down to 27.43% in September, slightly lower than the 27.58% recorded in August.

The inflation trend in September is contradictory, as the decline in core inflation suggests that the rise in headline inflation may not last long before it begins to decelerate.

Beginning of a new trend

Analysts suggest that the increase in the September headline index could be the beginning of a trend due to expectations of an increase in aggregate demand (Christmas and payment of minimum wage) in the coming months. According to Will Rogers, “There have been three great inventions since the beginning of time: fire, the wheel, and central banking”. The decision of the CBN is pivotal at this point as headline inflation takes a new turn. In response to this, the MPC may likely take a pause at its next meeting in November to assess the effect of the whopping 850 basis points hike. Moreover, this is coupled with the fact that the economy is overheated, and economic activities have slowed down.

In the link below, the FDC Think-Tank analyzes the inflation data for September and its impact on the economic policy environment.

Enjoy your read!