In line with our expectation, February headline inflation rate further moderated to 11.31% year-on-year (from 11.37% in January 2019), printing two consecutive months of decline.

The sustained fall in annual inflation rate was driven by decreases in food prices, especially in Abia, Delta and Lagos States – food inflation in the respective states moderated y-o-y to 10.81%, 11.51% and 12.94% in February 2019.

The pressure on general price level of food eased y-o-y to 13.47% (slower than 13.51% in January 2019), amid harvest season which lasted till the end of February.

In the same vein, core inflation rate grew slower, on an annual basis, to 9.80% (from 9.91% growth in January 2019) and on a monthly basis, slowed to 0.65% (against 0.81% growth in January 2019).

This was partly driven by y-o-y fall in the costs of transport (-0.22%), clothing & footwear (-0.06%) and energy cost (-0.11%). Although the change in price level for imported food remained above headline inflation rate of 11.31%, we saw it slow y-o-y to 15.61% in the month under review (from 15.66% in January 2019) amid monthly average appreciation of the Naira against USD across market segments (FX rate fell m-o-m by 1.72% to N357.50/USD at the BDC market).

Inflation rate in the urban area dropped y-o-y to 11.59% (from 11.66%) as well as in the rural area, to 11.05% (from 11.11%) in February 2019.
Outlook:

“Amid delayed implementation of minimum wage, early stage of planting season and stability of the foreign exchnage rate, we expect headline inflation to further maintain its lower trajectory in March 2019″.

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