Economy

Base Effects Dictate Inflation Trajectory

Published

9 years ago

20/04/2017

By ARM Securities

Nigeria’s headline inflation decelerated for the second consecutive month (-50bps) to 17.3% in March – though lagging the scale of moderation in prior month’s reading (-92bps).

Instructively, the reading was significantly behind Bloomberg consensus estimate of 16.7% as changes in food inflation (-10bps to 18.4% YoY) failed to keep pace with expected impact of naira gains at the parallel market in the review month.

That said, high base effect from 2016 electricity and PMS price hikes saw core inflation decelerate a further 60bps to 15.4% to dictate overall YoY headline trajectory. On a MoM basis, headline inflation increased by 1.72% (vs. 1.49% in prior month’s reading) largely reflecting unyielding food pressures (MoM: 2.21%).

Focusing on core inflationary movements, breakdowns indicate a 1.32% MoM increase in the core basket buoyed by increases in prices of miscellaneous services related to dwelling, solid fuels, clothing materials, spirits, lubricants, and personal transport.

Also, despite moderation in prices of some known energy components (PMS (-0.3% MoM), Kerosene (-14.2% MoM) and Diesel (-5.4% MoM)), pressures from other sources (e.g. solid energy) drove energy inflation higher to 1.4% MoM.

The foregoing combined with the pressures on miscellaneous services front drove core inflation higher in the review month.

Overall, despite core inflationary pressures suggested by the MoM readings, the impact of high base remained evident on YoY numbers as increases in PMS (+10% YoY), kerosene (+54% YoY), and diesel (+60% YoY) in March failed to stall YoY core deceleration.

In line with the trend recorded over the prior months, MoM food inflation increased sharply by 2.2% (vs. February reading of 1.99%) despite naira gains at the parallel market in March.

According to FEWSNET, pressures on Nigeria’s farm produce prices persisted despite recent gains in foreign reserve (+0.4% to $30.4 billion) and direct government intervention due to structural challenges, restriction on use of forex reserve for food imports as well as higher transactions and transportation cost (March transport inflation: +1.2% MoM, +15% YoY) in the review period.

Specifically, while government’s interventions—including Anchor Borrowers programme—slightly increased areas cultivated, initiatives to curb transport challenges (i.e. grain by rail) were yet to kick-in to stem the major transport setback in the review month.

Importantly, MoM transportation inflation have steadily increased in the last three months, with the March reading (1.2% MoM) printing at the highest level since July 2016, following price hikes by major transport associations across the country in response to the sharp jump in Diesel prices in December.

For context, we note that the cost of transportation between assembly markets in North Central and other Northwest states of Nigeria, particularly to Dawanau market in Kano, increased by about 70% compared to last year.

Going forward, we expect impact of high base effect to continue to dictate core inflation and overall headline trajectory despite concerns on the food inflation front. Precisely, high base effect from the 45% and 68% increases in electricity and PMS prices in 2016 should leave YoY core reading subdued with recent gains in PMS, kerosene, and diesel prices leaving sizable scope for sustained decelerations.

However, we are less sanguine on the food side of things over the near term owing to recent pressures from higher transactions and transportation costs.

That said, the more recent retrace in diesel prices suggests that pressures from the transport front would be less impacting in coming reading. In addition to this, the incentive of higher prices and FG’s continued push on the Anchor Borrowers Program front are notable signposts of gradual near and medium term gains relating to domestic food availability respectively.

On the former, we expect farmers to sustain their ramp up of output in April offseason harvest as higher prices continue to provide the needed incentive.

Thus, with lagged impact of naira gains at the parallel market also raising scope for temperance in demand pressures from neighbouring West Africa, pressures on food inflation should be relatively contained in the coming reading compared to that of the prior month.

On balance, we expect moderation in core inflation to offset pressures from food inflation.

Against this backdrop, we now look for headline reading of 16.7% YoY for April with 2017 mean now printing at 15.4% YoY (2016: 15.6% YoY).

In terms of market impact, elevated MoM inflation reading provide another justification for CBN to leave its hawkish monetary policy intact over the near term.

That said, given the impact of contractionary monetary policy on FG’s borrowing cost with April 2017 subscription (N111 billion) significantly below amount on offer (N135 billion), we think pressures from the fiscal authorities could compel some form of monetary easing over H2 17.

Source: www.armsecurities.com.ng.

Economy

Four Securities Erase N51.17bn from NASD Exchange

Published

1 day ago

27/06/2026

Adedapo Adesanya

By Adedapo Adesanya

Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.

In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.

The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.

During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.

Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.

GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.

Economy

Cautious Trading, Profit-taking Weaken Nigeria’s Stock Exchange by 0.66%

Published

1 day ago

27/06/2026

Dipo Olowookere

By Dipo Olowookere

The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.

This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.

Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.

At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.

Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.

The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.

As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.

Economy

Official FX Market Sees Naira Dip to N1,380.93/$1

Published

1 day ago

27/06/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.

Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.

At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.

Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.

Also, a stronger greenback has generally put significant pressure on emerging-market currencies.

Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).

The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.

If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.

At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.

On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.