Annual inflation in Nigeria rose for the third time in four months after accelerating by 11.28 percent year on year in November 2018 on the back of higher food prices.
This is 0.02 percentage points higher than the 11.26 percent recorded in October 2018 and is slightly higher than the mean analysts’ estimate for a slowdown to 11.25 percent.
The food sub-index rose to 0.90 percent from 0.82 percent the previous month following an increase in the prices of staples like bread and cereals, milk, cheese and egg, fish and vegetables, fruits, oils.
On a year-on-year comparison, food inflation still accelerated, rising to 13.30 percent from 13.28 percent in Oct 2018 while Core Inflation slowed to 9.80 percent from 9.90 percent in Oct 2018.
READ ALSO: Double trouble: Job losses and inflation hit Nigeria
Higher inflation has already been priced into bonds and treasury bills. Average yields rising to 15.62 percent Thursday, some 434 basis points above the November inflation rate, leaving investors with a real return of about 4 percent.
Analysts expect yields to trend higher as the CBN steps up efforts to keep naira assets attractive to foreign portfolio investors.
“We expect the high yield environment to be sustained due to the renewed vigour on the part of the CBN to stabilize the exchange rate which has come under pressure from the drop in the global prices of crude,” analysts at Lagos-based investment firm, Meristem said in a note to clients Friday.
Worried about price growth ahead of general elections next February, the CBN left benchmark interest rates unchanged at 14 percent at the last monetary policy meeting in November. The benchmark rate has been at that level for two years.
At 11.28 percent, inflation remains above the preferred regulatory band of between 6 to 9 percent.
Investors have largely rotated to fixed income assets from government Bonds to Treasury bills over the past six months and higher yields will only add to the attraction for these assets.
Average yields are up to about 16 percent from only 11 percent at the start of the year. Higher yields in the bond space is bad news for equities which are down some 20 percent since the start of the year, with blue-chip companies from Dangote Cement to the tier-one banks providing attractive entry points for value investors.
The consistent downward trend in the equities market reflect current risks in the political space and expectations regarding corporate earnings, a trend the new inflation figures may be powerless to alter.
LOLADE AKINMURELE
