Freshly released June inflation report showed that headline inflation rate slowed its uptrend, to 11.22% year-on-year (from 11.40% in May 2019).
The recent decline in the annual inflation was chiefly driven by the decrease in annual food inflation rate as it slowed to 13.56% in June 2019 from 13.79% in June 2018.
Similarly, monthly food inflation slowed m-o-m to 1.36% in the month of June from 1.41% in the month of May despite the worsened insecurity challenges in the country in recent months as well as the decline in food stockpiles which is usually the case during the planting season.
Among the federating states, Kogi (+ 9.81%), Bayelsa (+ 9.97%) and Abia (+ 10.84%) recorded the slowest rise in food inflation; however, Kaduna (+ 17.50%), Kebbi (+ 16.96%) and Ondo (+ 16.44%) recorded the fastest increase in food prices.
Also, annual core inflation eased further into single digit, 8.84%, in June 2019 from 9.03% in June 2018 on the back of slower transport (-0.35%) and energy (-0.12%) costs. However, we saw core inflation rate rise on a monthly basis to 0.85% (from 0.75% in May). This was partly caused by m-o-m increase in the costs of clothing & footwear (1.64%).
Similarly, m-o-m change in price level for imported food increased by 1.34% as Naira depreciated against the USD in most FX market segments, especially at the interbank window as foreign exchange rate rose (i.e Naira depreciated) m-o-m by 0.10% to N357.10/USD in June 2019.
Inflation rate in the urban and rural areas moderated y-o-y to 11.61% (from 11.76%) and 10.87% (from 11.08%) respectively.
In another development, the Global Off-Grid Lightening Association (GOGLA), the global association for the off-grid solar energy industry, in its latest report titled “Providing Energy Access through Off-Grid Solar” stated that Nigeria was amongst the top five countries with the largest cash market of off-grid solar energy products.
Of the 46 countries ranked, Nigeria moved up by three places to the fourth position in 2018 from the seventh position in 2017 as its cash sales increased by 58.6% to USD4.8 million in 2018 from the USD2.9 million it printed in 2017.
According to the report, top countries ahead of Nigeria with respect to off-grid solar cash sales in 2018 were India (USD94.3 million), Kenya (USD18 million) and Ethiopia (USD10.8 million).
Meanwhile, Nigeria’s deficit in thermal power delivery to its citizens might significantly be addressed amid the planned USD700 million Assa North Ohaji South (ANOS) gas and condensate field project by Seplat Petroleum Development Company Plc (Seplat).
The ANOH gas processing project which will be managed by Anoh Gas Processing Company (AGPC), an incorporated joint venture between Seplat and Nigerian Gas Company, will deliver a 300 Million standard cubic feet per day (Mscfd).
Similarly, the Vice-Chancellor of Obafemi Awolowo University (OAU), Ile-Ife, Osun State, Professor Eyiyope Ogunbodede stated that the institution has commenced power generating project that would make the institution generate Eight megawatts of electricity for the institution and exit the national grid by October 2019.
We expect inflation rate to rise in the coming months amid Central Bank of Nigeria’s (CBN) recent policies to stimulate economic growth and further implementation of minimum wage for some categories of workers.
President Muhammadu Buhari recently approved the immediate implementation of minimum wage for those federal workers earnning below N30,000. Meanwhile, high energy costs still remain one of the challenges producers grapple with; thus, significant improvement in the power sector will reduce average cost of production and impact positively on inflation rate.
Elsewhere, ahead of the 268th Monetary Policy Committee (MPC) meeting scheduled for Monday and Tuesday, July 22 and 23, 2019, we expect the MPC to retain the MPR at 13.50%, within the existing asymmetric corridor of +2% and -5% inline with its current drive for economic growth.