Ease in October Inflation Rate to 15.99%, GDP Growth of 4.03% Good Omen for Nigeria…


October inflation report by NBS showed
sustained ease in headline inflation, the seventh consecutive disinflation, to 15.99% in October (from 16.63% recorded in September).

This was chiefly driven by slower increase in food Inflation.

Slower inflation rates were also
registered in both urban and rural areas at 16.52% (from 17.19%) and 15.48% (from
16.08%) respectively in October; also based on moderation in food inflation.

Against the backdrop of the harvest season coupled with sustained high-base effect, the food Index rose at a slower pace, by 18.34% in October (compared to 19.57% recorded in September) as there were weaker y-o-y increases in prices of oils & fats, bread & cereals, fish, coffee, tea & cocoa, tubers, dairy and egg.

Similarly, core inflation rate eased to 13.27% (from 13.74% in September) on the back of slower y-o-y rise in prices of clothing & footwear, Housing water, electricity, gas & other utilities, as well as furnishings & household equipment maintenance.

Meanwhile, imported food index rose by 17.24% (as agaisnt 17.19% in September) as Naira further depreciated against the greenback at the Parallel market and the interbank window.

Two months moving average foreign exchange rate at the Parallel market rose m-o-m by 4.94% to N562.80/USD in October 2021.

On a month-on-month basis, headline inflation declined in October to 0.98% (from 1.15%) amid sustained moderation in prices of food items (food inflation rate fell to 0.91% from 1.26%) even as core inflation rate moderated to 0.80% (from 1.24%).

In another development, Nigeria recorded a year-on-year (y-o- y) real output growth rate of 4.03% to N18.54 trillion (or USD123.38 billion) in the third quarter of 2021 to sustain it recovery from last year’s recession.

Recently, the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, reportedly stated that about N3 trillion had been disbursed to households, small and medium scale enterprises, smallholder farmers and pharmaceutical companies amongst others to cushion the negative impact of COVID-19 on the local economy.

Specifically, the rapid growth was driven essentially by a 5.44% growth in non-oil sector; with Trade, Information & Communication, Manufacturing and Agricultural sectors recording the largest growth rates of 11.90%, 9.66%, 4.29% and 1.22% respectively.

Financial services also witnessed a strong growth of 23.23% (from a decline of 2.48% in Q2). In the oil & gas sector, however, we saw a 10.73% y-o-y drop in real output to N1.39 trillion (or USD9.24 billion) as average daily oil production fell y-o-y by 7.79% to 1.35 million barrels per day (mbpd).

We note that the increase in crude oil price to USD85 per barrel appeared insufficient to compensate for the reduction in Nigeria’s crude oil production.

On a quarterly basis, real GDP increased by 11.07% to N18.54 trillion (or USD123.38 billion) from N16.69 trillion (or USD111.08 billion) in Q2 2021; with the non-oil sector rising by 10.99% to N17.15 trillion (or USD114.13 billion).

Agriculture, the largest contributor to real GDP at 29.94%, rose q-o-q by 39.83%. Also, the oil & gas sector increased by 12.05% to N1.39 trillion (or USD9.24 billion)

Recently, we have seen Naira appreciate against other foreign currencies, especially the greenback hence, easing the foreign exchange volatility the country experienced couple of months ago.

Also, the increase in food supply on account of the ongoing harvest season would as well ease inflation in the month of November.

However, we might see upward pressures in annual inflaition rate in December amid retail price increases associated with consumer spending in the yultide season.

Meanwhile, Cowry Research notes that the increase in output would also drive inflation rate lower, especially in the agricultural sector which grew 39.83% in a quarter.