Official data released by the National Bureau of Statistics (NBS) this week indicated that Nigeria’s Headline inflation rate, the measure of the average change in the general price level of goods and services in the economy for August 2021, slow for the fifth consecutive month to 17.01% from 17.38% in the prior month.
On the month-on-month basis, the headline inflation rose to 1.02% compared to 0.93% reported in July.
Disaggregating into the headline inflation components; Food and Core inflation. The Food Inflation Index dipped 0.73% to increase by 20.30% in August 2021, compared to 21.03% in July 2021 – meaning food items are less expensive in August 2021 as against July 2020, impacted by the harvest season period.
But more expensive compared to July 2021, as the index rose to 1.06% in August 2021, from 0.86% in July 2021, as banditry activities intensify in the northern part of the country
On the Other hand, Core inflation which excludes all agricultural produces, stood at 13.41%y/y and 0.77%m/m, down 0.31% and 0.54%, respectively, reversing July’s uptick.
The increase in Core Inflation was a result of price increase in Shoes and other footwear, Household textile, Motor cars, Garments, Game of chance, Major household electric appliances, Hospital services, catering services, Appliances, articles and products for personal care and Clothing materials, other articles of clothing and clothing accessories.
Remarkably, the Naira in August appreciated in the I&E Window by 0.08% to close at ₦411.34/USD.
While it depreciated at the Parallel markets by 1.94%, to close at ₦525/USD, despite the increase in system liquidity.
However, according to the Nigeria Security Tracker, seven insecurity attacks occurred in August, including the Nigeria Defense Academy (NDA), compared to six attacks in July.
Conclusively, despite the slumping rate of Naira against other currencies in the FX market, we expect the September 2021 inflation decline to about 16.7% and 16.9% as against the August rate.
In the recent MPC meeting that was held on September 16 and 17, where the eleven (11) members of the MPC committee convened at the CBN headquarter to review and make critical decisions on the direction of key monetary policy variables for the next two months.