Nigerian inflation rises for the first time in 18 months

Inflation rate in Nigeria increased by 11.23 percent year-on-year in August 2018, 0.09 percentage points higher than the 11.14 percent recorded in July 2018 on the back of higher food prices and increased liquidity. This is the first year on year rise in headline inflation following eighteenth consecutive disinflation in headline inflation.

Increases were recorded in all Classification of Individual Consumption by Purpose (COICOP) divisions that yielded the Headline index, according to the CPI and Inflation Report August 2018 released on Friday by the National Bureau of Statistics (NBS).

The composite food index rose by 13.16 percent in August 2018 compared to 12.85 percent in July 2018, as prices of Bread and cereals, Potatoes, yam and other tubers, Meat, Vegetables, Fish, Fruits and Oils and Fat grew. On month-on-month basis, the food sub-index increased by 1.42 percent in August 2018, up by 0.02 percent points from 1.40 percent recorded in July.

However, the “All items less farm produce” or Core inflation, which excludes the prices of volatile agricultural produce stood at 10.0 percent in August 2018, down by 0.2 percent from the rate recorded in July 2018.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) had in July kept the bank’s key rate unchanged at 14 percent for the 12th consecutive time, a tight monetary policy stance which has continued to ease inflationary pressures. The committee, however, noted that inflationary was building up.

“In view of the trend in rising month-on-month inflation rate, amid the slowly declining year-on-year headline inflation, indications were that inflationary pressures are rebuilding in the domestic economy,” the committee said in a communique released at the end of its July meeting. It expressed concern on the threat posed by incessant herdsmen-farmers crisis in some key food producing states and the negative impact on food supply chains which it noted would continue to exert upward pressure on food prices.

The committee also said it expected liquidity from expansionary 2018 budget and rising Federation Accounts Allocation Committee (FAAC) disbursement in the second half of the year plus pre-election year spending to take its toll on inflation.

Following the inflation rate recorded in August, analysts expect the MPC to keep key rates unchanged when it meets again from 24 to 25 September, 2018.

Also published on Medium.