Decline in food index help slow down Nigerian inflation to 15.91 pct

The sudden drop in Nigeria food index has helped the Africa's biggest economy recorded moderate growth in its consumer inflation figure for the month of October, the National Bureau of Statistics (NBS) said on Wednesday in a report.

The annual consumer inflation slowed for the ninth month in a row in October to 15.91 percent from 15.98 percent the previous month.

However, the food price index slowed to 20.31 percent in October, compared with 20.32 percent in the previous month.
“The rise in the food index, in October 2017 was caused by increases in prices of bread and cereals, meats, oils and fats, coffee tea and cocoa, milk cheese and eggs vegetables and fish,” the statistics office said in its report.
Last month, Central Bank Governor Godwin Emefiele said he expected inflation rates to fall at a faster pace and reach high single-digit rates by the middle of 2018.
The central bank kept interest rates at 14 percent in September to keep liquidity tight, saying it felt that loosening would worsen inflation. The bank’s monetary policy committee is due to announce its latest interest rate decision on Nov. 21.
Nigeria emerged from its first recession in 25 years in the second quarter as oil revenues rose, although the slow pace of growth suggests the recovery remains fragile.
In a flash note to its clients, United Capital said a thorough analysis of the CPI numbers for the month of October indicated that the moderation in headline inflation rate to 15.91 percent was broadly driven by a surprise reduction in the food sub-index which slowed to 20.3 percent y/y and declined 2bps m/m in Oct-17.

Additionally, we observed that despite y/y marginal increase in core inflation sub-index to 12.1 percent in Oct-17, the m/m component of the sub-index fell for the fourth consecutive month to 0.8 percent in Oct-17, further supporting the slowdown in the headline rate. 

Overall, the slowdown in food sub-index is an indication that pressure on food prices continues to reduce. 

The continued stability in the FX market, as well as expectation of stable harvest season, should see inflation trend further down in the coming months. 

We, therefore, see the headline inflation number moderating to 15.70 percent in November.