Freshly released July inflation report showed that headline inflation rate moderated further to 11.08% year-on-year (from 11.22% in June 2019), printing two consecutive months of decline.
The recent southward movement in the annual inflation was driven by the decreases in annual food and core inflation rates. Specifically, annual food inflation rate slowed to 13.39% in July 2019 from 13.56% in June 2019.
Also, monthly food inflation slowed m-o-m to 1.26% in the month of July from 1.36% in the month of June despite the worsened insecurity challenges in the country in recent times as well as the anticipated decline in food stockpiles which is usually the case during the planting season.
We saw inflation rate fall in some states currently experiencing relatively worsened insecurity: Kaduna 14.03% ( from 17.50%) and Zamfara 14.92% (from 15.42%). Similarly, annual core inflation eased further into single digit to 8.80% y-o-y in July 2019 from 8.84% in June 2019 on the back of decline in transport (-0.18%) and energy (-0.05%) costs.
Also, we saw core inflation rate slow on a montly basis to 0.77% (from 0.85% in June). However, y-o-y change in price level for imported food increased by 0.64% as Naira depreciated against the USD in most FX market segments, especially at the interbank window where monthly average foreign exchange rate rose (i.e Naira depreciated) y-o-y by 8.37% to N357.62/USD in July 2019.
“We expect imported food inflation rate to further rise as demand pressure on the Naira persist amid the recent outflows of foreign portfolio investors and declining crude oil prices engendered by the continuing trade war between US and China”.