Nigeria’s headline rate has remained at double-digit levels since February 2016.
According to analysts as FBNQuest, this year the highest increase in headline inflation has been 16bps in June while January, February and April registered rises of 15bps, 7bps and 8bps, respectively.
Food inflation has been the primary driver of acceleration in the headline rate. Given the disruptions to the transportation of food items from farms to markets due to the Covid-19 pandemic, there have been further food supply shocks.
· The prices of items within the core inflation basket have also picked up over the past few months. The latest inflation report tells us that the transport segment, which accounts for 6.5% of the basket, showed price increases of 1.0% m/m in June (unchanged from the previous month) and 10.4% y/y, compared with 10.1% in May.
· A separate report from the National Bureau of Statistics reveals that the average fare paid by commuters for bus journeys within cities increased by 3.6% m/m and 25.8% y/y in June. Zamfara, Abuja and Cross River states recorded the highest increases.
· The same report discloses that the average fare paid by commuters for intercity bus journeys increased by 1.1% m/m and 13.5% y/y in June. To maintain social distancing as instructed by the Federal government, commercial buses have had to reduce passenger intake by at least half of the initial numbers pre-Covid. This has pushed up mass transportation costs.
· The segment categorised as housing, water, electricity, and gas and other fuels, the largest component of the core measure, recorded a price increase of 7.9% y/y in June, compared with 7.8% recorded in the previous month. The implementation of the review of the electricity tariff has been deferred to 2021.
· The price rises recorded in the health segment within the basket highlight the Covid-19 effect. In June increases of 1.2% m/m and 11.1% y/y were recorded for the segment.
Pharmaceuticals and medical services continue to feature as leading drivers of core inflation.
· The restaurants and hotels segment has been severely hit by the pandemic. Restaurants have been forced to depend on delivery services. In addition, the general rise in food prices have also resulted in upward revisions of sale items in restaurants. In June price increases of 0.8% m/m and 9.5% y/y were recorded in this segment.
· At its latest meeting held on Monday, the Central Bank’s monetary policy committee noted the contribution of legacy structural factors to the persistent uptick in inflation. These factors include: disruptions to key supply channels due to security challenges from herder-farmer clashes, banditry/kidnapping, inadequate transportation outlay, epileptic power supply, and low technological adaptability.
