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

Customs Street Chalks up 1.08% on Renewed Buying Pressure

Published

38 minutes ago

06/12/2025

Dipo Olowookere

By Dipo Olowookere

A 1.08 per cent growth was further printed by the Nigerian Exchange (NGX) Limited on Friday on improved appetite for Nigerian stocks.

Data showed that the insurance sector lost 0.61 per cent yesterday due to profit-taking as the energy space gave up 0.08 per cent, while the commodity counter closed flat.

However, the industrial goods landscape appreciated by 2.06 per cent, the banking index improved by 1.31 per cent, and the consumer goods sector expanded by 0.83 per cent.

At the close of business on Customs Street, the All-Share Index (ASI) increased by 1,563.92 points to 147,040.07 points from 145,476.15 points and the market capitalisation went up by N996 billion to N93.722 trillion from N92.726 trillion.

UAC Nigeria led the advancers’ log yesterday after it grew by 10.00 per cent to N96.80, Transcorp Hotels jumped by 9.71 per cent to N172.80, Royal Exchange appreciated by 8.89 per cent to N1.96, Ikeja Hotel soared by 8.74 per cent to N31.10, and Veritas Kapital leapt by 8.07 per cent to N1.74.

On the flip side, Union Dicon declined by 10.00 per cent to N6.30, ABC Transport slipped by 9.88 per cent to N3.10, AXA Mansard depreciated by 7.19 per cent to N12.90, FTN Cocoa lost 4.62 per cent to trade at N4.75, and Guinea Insurance dropped 3.36 per cent to finish at N1.15.

A total of 38 stocks ended on the gainers’ table and 17 stocks finished on the losers’ table, representing a positive market breadth index and strong investor sentiment.

Traders transacted 361.6 million equities for N14.8 billion in 21,051 deals yesterday versus the 1.9 billion equities worth N19.2 billion traded in 23,369 deals a day earlier, showing a decline in the trading volume, value, and number of deals by 80.97 per cent, 22.92 per cent, and 14.20 per cent, respectively.

The busiest stock for the session was Zenith Bank with 59.5 million units worth N3.6 billion, Access Holdings traded 46.1 million units valued at N973.0 million, Fidelity Bank exchanged 29.4 million units for N560.4 million, FCMB transacted 27.9 million units worth N293.9 million, and Tantalizers sold 13.0 million units valued at N29.8 million.

Economy

Nipco, 11 Plc Crash OTC Securities Exchange by 4.76%

Published

2 hours ago

06/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Energy stocks influenced the 4.76 per cent loss recorded by the NASD Over-the-Counter (OTC) Securities Exchange on Friday, December 5.

The culprits were the duo of 11 Plc and Nipco Plc,with the former shedding N32.17 to end at N291.83 per share compared with the previous day’s N324.00 per share, and the latter down by N21.00 to sell at N195.00 per unit versus the previous session’s N216.00 per unit.

Consequently, the NASD Unlisted Security Index (NSI) slumped by 170.16 points to 3,401.37 points from 3,571.53 points and the market capitalisation lost N101.81 billion to close at N2.035 billion from the N2.136 trillion quoted in the preceding session.

The OTC securities exchange suffered the decline yesterday despite the share prices of three companies closing green.

Central Securities Clearing System (CSCS) Plc was up by N1.80 to close at N39.80 per share compared with Thursday’s price of N38.00 per share, Air Liquide Plc appreciated by N1.09 to N11.99 per unit from N10.90 per unit, and FrieslandCampina Wamco Nigeria Plc grew by 78 Kobo to N56.57 per share from N55.79 per share.

During the session, the volume of transactions rose by 6,885.3 per cent to 18.2 million units from 4.3 million units, the value of transactions ballooned by 10,301.7 per cent to N389.7 million from N347.2 million, but the number of deals declined by 29.7 per cent to 26 deals from 37 deals.

Infrastructure Credit Guarantee Company (InfraCredit) Plc ended the day as the most traded stock by value on a year-to-date basis with 5.8 billion units worth N16.4 billion, followed by Okitipupa Plc with 170.4 million units valued at N8.0 billion, and Air Liquide Plc with 507.5 million units worth N4.2 billion.

InfraCredit Plc also finished the day as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units worth N524.9 million.

Economy

Naira Depreciates to N1,450/$1 at Official Forex Market

Published

2 hours ago

06/12/2025

Adedapo Adesanya

By Adedapo Adesanya

The Naira depreciated further against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, December 5, as FX demand pressure mounts.

The Nigerian currency lost N2.60 or 0.18 per cent against the greenback to close at N1,450.43/$1 compared with the previous day’s N1,447.83/$1.

Equally, the domestic currency declined against the Pound Sterling in the official forex market during the session by N4.48 to trade at N1,935.45/£1, in contrast to Thursday’s closing price of N1,930.97/£1 and shrank against the Euro by 43 Kobo to end at N1,689.17/€1 versus the preceding session’s rate of N1,688.74/€1.

Similarly, the local currency performed badly against the US Dollar at the GTBank FX counter by N2 to close at N1,455/$1 versus Thursday’s N1,453/$1 but traded flat at the parallel market at N14.65/$1.

As the country gets into the festive period, pressure mounted on the local currency reflecting higher foreign payments and lower FX inflows.

However, there are expectations that the Nigerian currency will be stable, supported by interventions by to the Central Bank of Nigeria (CBN) in the face of steady dollar Demand and inflows from Detty December festivities that will give the Naira a boost after it depreciated mildly last month.

Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450/$1 next week, buoyed by improved FX interventions by the apex bank.

As for the crypto market, it was down yesterday due to profit-taking associated with year-end trading. However, the December 1-Year Consumer Inflation Expectation by the University of Michigan fell to 4.1 per cent from 4.5 per cent previously and 4.5 per cent expected. The 5-Year Consumer Inflation Expectation fell to 3.2 per cent from 3.4 per cent previously and 3.4 per cent expected.

With the dearth of official economic data of late, these private surveys have taken on a new level of significance and the market banks of them to make decisions.

Cardano (ADA) depreciated by 5.7 per cent to $0.4142, Dogecoin (DOGE) slid by 5.1 per cent to $0.1394, Ethereum (ETH) dropped by 3.9 per cent to $3,039.75, Solana (SOL) declined by 3.8 per cent to $133.24, and Litecoin (LTC) fell by 3.7 per cent to $80.59.

Further, Bitcoin (BTC) went down by 2.6 per cent to sell at $89,683.72, Binance Coin (BNB) slumped by 2.2 per cent to $883.59, and Ripple (XRP) shrank by 2.1 per cent to $2.04, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.