Recently released November inflation report showed that headline inflation rate reversed its downtrend, to 11.28% year-on-year (from 11.26% in October 2018) in line with our expectation.
The marginal increase in annual inflation rate was driven by higher prices of food in rural areas – rural food inflation increased to 12.76% in November 2018 from 12.70% in October
Hence, rise in food index persisted y-o-y to 13.30% (higher
than 13.28% in October) due to the flood and security challenges experienced in some parts of the country in the month of November.
Edo (+ 16.52%), Imo (+ 11.76%) and Beyelsa (+12.04%) recorded the fastest rise in food inflation while Oyo (+10.84%), Abia (+ 11.24%) and Kogi (+ 11.50%) recorded the slowest increase in food prices. However, core inflation rate declined on an annual basis to 9.79% (from 9.88% in October).
This was partly driven by y-o-y decrease in the costs of transport (-0.08%) and clothing & footwear (-0.01%) despite the y-o-y rise in energy cost (+0.06%). Also, m-o-m change in price level
for imported food moderated by 0.03% amid appreciation of the Naira against USD (FX rate fell to N360.66) at the interbank FX market as well as month-on-month decline in global commodity
prices such as palm oil (fell 8.56% to USD539.78/MT) and wheat (fell 4.65% to USD203.56/MT).
“We expect further upward pressure on general price level of goods and services as Presidential election campaigns intensify, along with the usual increase spending in Yuletide season”.