Latest on inflation
The NBS recently released the inflation data for December 2022 with headline inflation coming in at 21.34 per cent, a 13-basis point reduction. This makes December the first month in 2022 with a fall in month-on-month inflation figures. Although inflation in this month was 572 basis points higher than same period in 2021.
A wide array of factors has been credited for the drop including customers becoming increasingly resistant to price increases, the relative stability of the dollar in the previous month that reduced the level of import inflation, and a relatively high base from the previous period. The reduced rate was also driven by a decline in food prices with food inflation coming in at 23.75 per cent in December from 24.13 per cent in November.
So what?
December’s inflation figures were expected to be higher because of seasonality, the celebrations and festivities that usually would indicate a surge in demand for goods, so the drop in inflation is welcomed with open arms.
We have previously written about the CBN’s attempt to tame inflation by hiking its MPR. We expect that future hikes might be put on hold or done at a slower pace as the CBN sees the fall in the inflation rate as a sign that the policy rate increase may have been effective. However, we don’t think the fall in inflation rate is related to the MPR as a closer inspection alludes to the fact that the fall resulted from dollar stability and high base effects.
This means that Nigeria’s inflation rate is largely out of the CBN’s control as it is majorly driven by factors they do not have direct impact on. As we continue to reiterate, the majority of Nigeria’s price instability issues are structural, and we will need to address the structural issues if we want to see a consistent drop in inflation.