Nigeria’s inflation schema has maintained an upward slope into H2 2023. July’s inflation numbers printed significantly higher than its preceding month, aided by both Food and Core inflation. The causes for the persistent increase in food prices are no news, given that no known measures have been effectively executed to mitigate the ongoing insecurity and displacement issues in the North. The Northern Green Harvest with its anticipated food distribution, also already hindered by high transportation costs, faced other impediments like floodings due to the ongoing rainy season. Meanwhile, imported food costs continue to accelerate with FX rates at cN788/$ at the I&E FX window – now Nigerian Foreign Exchange Market (NFEM), and cN870/$ in the Parallel Market as of July 2023.
Likewise, Core inflation continues to play its hand in the uptick of headline inflation. The 2nd increase in pump prices to N568/ltr was unanticipated. Further tightening the necks of citizens still adjusting to the initial price hike. Symmetrically, fuel consumption declined to 46.3 million litres per day for July 2023, against 66.6 million litres per day in May 2023 prior to the subsidy removal. This translates to lower demand for fuel, depicting reduced movement of individuals and food items.
Despite the anticipated operations of local refineries and the President’s 500,000 hectares farmland plan, our inflation expectations for the ensuing months remain dreary. Factors like further flood fears in Southern Nigeria, speculative price hikes in pump prices, continued depreciation of the Naira and sustained dependency on imports impel our expectations.
In another report by Futureview, inflation was classified into two-
URBAN INFLATION
From a year-on-year perspective, the urban inflation rate for July 2023 was 25.83%, presenting a significant 5.74 percentage point increase compared to the 20.09% recorded in July 2022. On a month-on-month basis, the urban inflation rate in July 2023 was 3.05%, demonstrating a 0.75 percentage point rise from June 2023 (2.31%). The corresponding twelve-month average urban inflation rate in July 2023 stood at 22.87%, indicating a substantial 5.59 percentage point increase from the 17.29% reported in July 2022.
RURAL INFLATION
The rural inflation rate for July 2023, observed on a year-on-year basis, reached 22.49%, marking a 3.26 percentage point increase compared to the 19.22% seen in July 2022. On a month-on-month basis, the rural inflation rate in July 2023 reached 2.74%, showing a growth of 0.78 percentage points from June 2023 (1.96%). The corresponding twelve-month average rural inflation rate for July 2023 was 21.04%, indicating a notable 4.79 percentage point increase from the 16.25% recorded in July 2022.
