Inflation prints at 22.04% y/y in Mar-23
The National Bureau of Statistics (NBS) released Nigeria’s March 2023 Consumer Price Index (CPI) report. The report’s extract revealed that inflation rose by 14bps to settle at 22.04% y/y compared to 21.91% reported in February 2023.
The increase in inflation was mainly driven by an upsurge in the prices of food and nonalcoholic beverages, which contributed 11.4% to the y/y increase of the CPI. On a m/m basis, headline inflation climbed 1.9% in March against 1.7% recorded in February.
Food inflation uptick by 2.1% m/m in March as against 2.0% m/m in February. The slight increase was due to the rise in prices of oil and fats, bread & cereals, potatoes, yams, fish, fruits, meat, vegetables, and spirits. On the other hand, the core inflation component (all items less farm produce or food) advanced by 1.8% m/m compared to 1.1% m/m in February. The most significant price rises were in gas, air travel, liquid fuel, fuel & lubricants for personal transport equipment, vehicle parts, solid fuel, etc.
Room for more rate hikes…
Ahead of the next Monetary Policy Committee (MPC) scheduled for May-2023, we expect the sustained surge in headline inflation and lingering foreign exchange pressures to be pivotal in the committee’s decision. The committee has maintained its commitment to price stability and combat inflation’s demand-pull element.
As year-on-year inflationary pressures persist, the MPC may be forced to defend its aggressive stance in combatting rising inflation. Also, the depreciation of the naira witnessed in 2023 amid weakening external
reserves will remain as justification for further rate hikes. In addition, the MPC may continue to hike rates in the short to medium term, in line with other major Central Banks, to help avoid capital flights from Nigeria to other developed economies with better returns. That said, we project a possible 25-50bps increase in Monetary Policy Rate (MPR) in its May-2023 meeting.
Kindly download the attached file to view our report and expectations.
Please Click Here for the full NBS report.
Source United Capital
