Inflation rises for second straight month to 21.91%

Nigeria’s headline inflation rate rose for the second straight month in February, largely driven by higher food prices.

According to data released by the National Bureau of Statistics on Wednesday, the inflation rate rose to a new 17-year high of 21.91 percent from 21.82 percent in the previous month.

“The contributions of items on a class basis to the increase in the headline index are presented thus: bread and cereal (21.67 percent), actual and imputed rent (7.74 percent), potatoes, yam and other tubers (6.06 percent), vegetable (5.44 percent) and meat (4.78 percent),” it said.

It said on a month-on month basis, inflation slowed to 1.71 percent, which was 0.16 percent points lower than the rate recorded in January 2023 (1.87 percent).

“This means that in February 2023, on average, the general price level was 0.16 percent lower relative to January 2023,” the report said.

Ayorinde Akinloye, an investor relations analyst at Seplat Energy Plc, said the pressure in food supply affected food prices, thereby pressuring the overall inflation numbers.

“We are beginning to see the impact of low food supply caused by poor harvest as a result of low rainfalls and floods,” he said.

Food inflation, which constitutes 50 percent of the inflation rate, was 24.35 percent, on a year-on-year basis, which was 7.24 percent points higher compared to the rate recorded in February (17.11 percent).

On a month-on-month basis, the food inflation rate in February was 1.90 percent, which was 0.18 percent points lower compared to the rate recorded in January (2.08 percent).

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Core inflation, which excludes the prices of volatile agricultural produce, stood at 18.84 percent on a year-on-year basis; up by 4.83 percent when compared to the 14.01 percent recorded in February last year. On a month-on-month basis, the core inflation rate was 1.06 percent in February.

The food inflation rate sub-component rose four basis points faster than the prior month to 24.4 percent year-on-year, reflecting the pass-through effect of imported food inflation, high transportation cost, and weak domestic supply capacity, analysts at Afrinvest Limited said.

“Meanwhile, the core inflation rate, aided in part by the improvement in petrol availability and slowdown in business activities due to elections and cash crunch rose less steeply by 18.8 percent year-on-year compared to 19.2 percent year-on-year in the prior month,” they said.

The Central Bank of Nigeria (CBN) is expected to hold its second Monetary Policy Committee (MPC) next week.

There are expectations from analysts that the country’s benchmark interest rate, popularly known as monetary policy rate (MPR), may remain unchanged at 17.5 percent on the back of the marginal increase in the February’s headline inflation rate.

Since May last year, the CBN has hiked interest rates five times in a bid to curb surging inflation in Africa’s biggest economy.

“The outturn may reinforce hawkish views on the MPC. While we think interest rates will be left unchanged at the meeting next week, the odds of another rate hike are shortening,” Virág Fórizs, Africa economist at Capital Economics, said.

Ikemesit Effiong, head of research at SBM Intelligence, added that since the increase in inflation rate is marginal, the MPC may hold rates to see if those deflationary effects from the cash policy continue to hold throughout March.