Headline inflation is projected to increase again in September (32.38%)

The rising cost of living has made inflation a critical issue in Nigeria. After increasing steadily for 18 months, headline inflation decelerated in the last two months, dropping to 32.15% in August due to base effects and the harvest season. While many Nigerians hoped this would lead to lower commodity prices, they were disappointed as the continuous rise in PMS prices since late August kept commodity prices stubbornly high.

The NBS is set to release September's CPI and inflation data tomorrow (October 15). At GDL, we expect headline inflation to reverse its two-month decline, increasing slightly by 0.23% to 32.38% from August’s 32.15%. This rise will largely reflect the pass-through effect of higher PMS prices on transport and logistics costs. Similarly, month-on-month inflation, which more accurately reflects recent price changes, is expected to rise to 2.27% (30.90% annualized) from 2.22% (30.07% annualized). Food inflation to moderate to 37.39%, supported by the harvest season

The year-on-year food inflation is projected to moderate to 37.39% in September from 37.52% in August. Similarly, the monthly sub-index is expected to decline to 2.35% from 2.37% in August. Notably, the boost in output due to the harvest season and the tariff suspension are expected to mute the impact of higher PMS prices on logistics costs.

Core inflation to edge higher to 27.75%, reflecting Naira depreciation and higher logistics costs

In September, we expect annual core inflation to climb to 27.75% from 27.58% in August. Monthly, core inflation is estimated to rise to 2.36% from 2.26%. This would be largely driven by Naira depreciation and the pass-through effect of higher PMS prices on transport and logistics costs. The Naira depreciated by 4.69%, closing September at a seven-month low of ₦1,705/$, down from ₦1,625/$ at the end of August, and it reached a record low of ₦1,667.42/$ at the official exchange window.

Possible Policy Reactions

The possible reversal in the downward inflation trend will be a major consideration at the next MPC in November, the last meeting for the year. The uptick in inflation could prompt the committee to consider a modest interest rate hike of 25 basis points.

Do you Know?

Inflation has undoubtedly taken a toll on consumers' wallets and reduced the real value of investments. However, do you know that certain asset classes can help mitigate the effects of inflation on your finances and investment value, depending on your risk tolerance?

Investment Options Based on Risk Profile: A financial expert can guide you through your investment journey. At GDL, your growth is our priority. If you have any questions or need assistance with your investment strategy, please don’t hesitate to reach out to us.