Owing to seasonality and the border closure, inflation rose to 11.98 percent in December, but like in November, the reading remained below 12.48 percent established in April 2018.
Food inflation hit 14.67 percent, while core inflation accelerated to 9.33 percent, the highest since March 2019. On a monthly basis inflation declined, however these are the five interesting things from the National Bureau of Statistics’ report.
Inflation surprised:
The rate of change in price level printed lower than most analysts had anticipated, a positive indication that part of the factors fuelling inflation is easing.
Financial Derivatives had forecast inflation to rise by 0.25 percent from November to 12.10 percent. Bloomberg’s poll was 12 percent and analysts across some investment houses in Nigeria predicted a similar outcome.
While a 0.02 percent point difference between major forecast and outcome is little, the importance of the lower reading is that it shows the waning impact of the border closure.
Inflation squeezes Real yield in fixed-income space:
The latest inflation figure means the real yield on the bellwether one-year primary yield at auction is -6.50 percent, the lowest since August 2010, says Analysts at Lagos-based Chapel Hill Denham.
On Wednesday, stop rates on 364-Day NTB crashed to 5.2 percent in the CBN’s primary auction.
Given the liquidity glut in the money market and dovish liquidity outlook, yields on NTBs have trended to sub-5 percent level in the secondary market, says Chapel Hill Denham. Similarly, yields on FGN bonds have trended lower to an average of 10.68 percent.
Read also: Nigeria&s inflation rises by 11.98 in December for fourth consecutive time
“Yet, outlook for inflation is biased to the upside, implying real returns on short term bills and bond yields would decline further into the negative region.”
Chapel Hill Denham expects only a marginal increase in headline inflation in January 2020 to 12.01 percent year-on-year, and estimate a more substantial increase to 12.13 percent year-on-year in February once the Finance Bill goes into effect.
Abuja had lowest inflation, Bauchi the highest:
In December, the Federal Capital Territory (FCT) had an annual inflation rate of 9.77 percent, the lowest among all 36 States plus FCT itself.
However if we consider the fact that Abuja is not a state, then Kwara’s 9.93 percent means it has the softest increment in price levels among Nigerian states.
Katsina (10.68%), Delta (10.73%), Imo (10.81%) and Benue (10.95%) are among the least in the country.
On the flip side, Bauchi (15.14%), Kebbi (14.43%), Plateau (14.34%), Sokoto (14.3%) and Taraba (13.8%) had the highest inflation rate among Nigerian states.
Transport inflation is lowest since 2015, at least:
At 9.25 percent, transport inflation (a component of core inflation is at its lowest in more than four years.
In Nigeria, transport prices typically go up in December especially for inter-city and urban-rural travels.
However since a 17.32 percent sharp rise in 2016, transport inflation has been steadily falling.
Nigeria’s inflation 2nd highest among Africa’s 5 biggest economies :
Nigeria’s inflation rate is the highest among big African peers like South Africa, Egypt, Algeria- if Angola is excluded from the list.
Only Angola (16.9%), Africa’s 5th biggest economy in 2018, and Nigeria (11.58%), the continent’s leading economy, have double-digit inflation among the top five markets.
South Africa in November reported 3.6 percent while Egypt and Algeria reported 7.1 percent and 1.6 percent respectively in December.
