Nigeria CPI (Nov.) - Capital Economics
Africa Economics

Nigeria CPI (Nov.)

Africa Data Response
Written by Virag Forizs

Nigerian inflation picked up again in November, driven mostly by rising food inflation. We think that the headline rate will continue to climb over the coming months and that policymakers will leave their key rate on hold until late 2020.

Inflation on the rise, rates to remain on hold

  • Nigerian inflation picked up again in November, driven mostly by rising food inflation. We think that the headline rate will continue to climb over the coming months and that policymakers will leave their key rate on hold until late 2020.
  • Figures released today showed that inflation in Nigeria picked up from 11.6% y/y in October to 11.9% y/y in November. (See Chart 1.) Our estimate and the consensus forecast collected by Bloomberg were both 11.8% y/y.
  • The breakdown shows that the main driver behind the increase was stronger food inflation. While it is difficult to precisely quantify the effect, the government’s policy to close the country’s land borders in mid-October has almost certainly pushed up food prices. The official aim of the measure was to crack down on illegal rice smuggling from neighbouring Benin. The food component of the headline rate rose from 14.1% y/y in October to 14.5% y/y in November, a 19-month high. (See Table 1.)
  • Other inflation sub-categories were largely unchanged. Core and transport inflation both ticked up by 0.1%-pts, to 9.0% y/y and 9.2% y/y, respectively. Housing inflation, on the other hand, softened a touch.
  • We think that inflation will continue to rise, probably peaking in mid-2020, and this will prevent policymakers from cutting rates to support the economy in the coming months. Instead, the Central Bank of Nigeria is likely to keep its faith in unconventional policy loosening methods. Price pressures will probably ease late next year, opening up space for lowering the key policy rate.

Chart 1: Consumer Prices & Key Policy Rate

Sources: Nigerian Bureau of Statistics, Central Bank of Nigeria, Capital Economics

Table 1: Nigeria Consumer Prices

Headline

Core

Food*

Housing

Transport

% y/y

% m/m

% y/y

% y/y

% y/y

% y/y

Aug.

11.0

1.0

8.7

13.2

9.2

8.9

Sep.

11.2

1.0

8.9

13.5

9.1

9.0

Oct.

11.6

1.1

8.9

14.1

9.1

9.1

Nov.

11.9

1.0

9.0

14.5

9.0

9.2

Sources: Nigerian Bureau of Statistics. (*) Includes non-alcoholic beverages


Virág Fórizs, Emerging Markets Economist, +44 20 7808 4079, virag.forizs@capitaleconomics.com