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CardinalStone Research: Inflation maintained its uptrend in August
(Source: CardinalStone Research, Date: 15-Sep-2023)

Inflation maintained its uptrend in August 

Nigeria's inflation remains stubbornly elevated, scaling by 1.72ppts to 25.8% YoY in August 2023 and sustaining its 18-year high. The uptick in prices reflects the lagged impact of the PMS subsidy removal and still-elevated AGO prices, leading to a 1.87ppts jump in HWEGF1. Consequently, the core inflation spiked to a 2-decade-high of 21.5%.

The food component of the CPI settled at an 18-year high after rising by 29.35% YoY in the review period. This is unsurprising, as the Famine Early Warning Systems Network (FEWS NET) revealed rainfall deficits in northcentral and northeastern Nigeria, major food-producing areas. This poor rainfall has reportedly caused crop wilting of millet, groundnut, and sorghum, with negative pass-through to prices. The below-average rainfall, coupled with the existing security concerns, high input cost and elevated transport prices, are negative for inflation print going forward.

Despite the policy rate at a record high of 18.75%, the continued rise in inflation will be a major source of concern for the monetary authorities at the next meeting. While we acknowledge the supply-side pressures, arguably the largest source of inflation in Nigeria, the material rise in money supply could have added to the weakened monetary policy transmission. For context, the money supply (M3) has increased by 25.5% since the start of the year.

1Housing, Water, Electricity, Gas and other Fuel


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