Economy
Inflation: Base Effect to bow out as Food Pressures Dictate CPI Tone
By ARM Research
Nigerian inflation continued its descent in May to an annual rate of 16.25%, down from 17.3% in April – the fourth consecutive deceleration in 2017. The moderation in CPI was reflective of another sizable down-leg in core inflation owing to impact of high base effect from 2016.
To be clear, while MoM core inflation was 5bps higher at 1.2% (vs. April reading), the YoY reading materially moderated (-173bps from prior reading to 13% YoY) in the review month to provide validation to our thesis.
Particularly, breakdowns provided revealed that moderations in HWEGF (-314bps to 13% YoY) and other energy-related sub core components were central to the further southward swing in core inflation. To buttress, increases in PMS prices have been subdued (+0.3% YoY to N150.70 per litre).
Notwithstanding the slight temperance in YoY food reading from prior month to 19.27% YoY—a reflection of similar base effects, MoM reading printed at its highest level in 12 months (+2.54% MoM) with the NBS noting highest increases in prices of bread and cereals, meat, fish, tubers, and vegetables.
Though much has been said of the potential impact of Naira appreciation on the food basket—with regards to its capacity to tame rising demand pressures from neighbouring West African countries, structural bottlenecks such as higher transport inflation have largely restricted potential pass-through in our view.
Specifically, transport inflation did not only fail to moderate in the review period, it touched its highest level in 9 months in May (+1.2% MoM) despite reported decline in diesel prices (-5.7% MoM to N216.30).
The pressure from transport largely reflects follow-through from recent price hikes by major transport associations across the country in response to the sharp jump in Diesel prices in December.
However, the recent MoM decline in diesel prices and subdued growth in PMS and cooking gas prices suggest that ongoing reforms are gradually gaining grounds despite current stickiness of transport cost.
Away from the strain from higher transport cost, increased demand for cereals—especially in the predominantly Muslim north—in the bloom of the Ramadan season also added another dimension to the Nigerian food price challenge in May.
Going forward, the continuation of the Ramadan season should leave pressures on cereal prices largely intact. Thus, aided by still elevated transportation cost which have limited gains from an appreciating naira, we remain bearish on food inflation despite ongoing green harvest in the Southern part of the country.
That said, the cumulative benefits of sustained FX policy gains appear to have finally caught up with energy prices given subdued MoM growth in prices of PMS and cooking gas as well as decline in diesel prices in recent readings.
We expect this to lead to a moderation in monthly core inflation reading in June—albeit expected to have a relatively pale influence on YoY reading compared to that from the just ended high base effect from 2016. Overall, our expectations across the core and food inflation buckets should translate to an unchanged headline reading of 16.25% YoY in June 2017.
In terms of market impact, the CBN is expected to maintain its ongoing foreign exchange management policy in line with its guidance at the last MPC.
Specifically, putting subsisting food inflation pressures side by side with the positives from the newly introduced FX window for Investors and Exporters thus far, the CBN is unlikely to be in a hurry to exit its ongoing tight monetary policy and FX market drives. In any case, evidence from last GDP report reveals that the economy is already well on its way to recovery. In the near term therefore, we expect the CBN to sustain its sizable FX supply and aggressive OMO issuances, with the liquidity sapping effect of the duo leaving short term interest rates elevated.
Source: ARM Research
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By Adedapo Adesanya
The duo of MRS Oil and FrieslandCampina Wamco Nigeria Plc weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Friday, June 5.
MRS Plc lost N19.00 during the session to sell at N171.00 per share compared with Thursday’s value of N190.00 per share, and FrieslandCampina Wamco Nigeria Plc depreciated by N8.70 to finish at N181.68 per unit compared with the preceding session’s N190.38 per unit.
As a result, the market capitalisation further lost N22.59 billion to close at N2.607 trillion versus the N2.630 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropped 37.76 points to settle at 4,358.32 points, in contrast to the previous day’s 4,396.08 points.
The alternative stock market closed the last trading day of this week with a price gainer, Central Securities Clearing System (CSCS) Plc, which gained 6 Kobo to quote at N78.40 per share compared with the preceding session’s N78.34 per share. However, it could not prevent the market from going down at the close of business.
Yesterday, the volume of securities bought and sold by investors went down by 50.0 per cent to 140,345 units from the preceding day’s 280,714 units, the value of stocks decreased by 16.5 per cent to N17.9 million from the previous session’s N21.5 million, and the number of deals carried out by market participants fell by 35.7 per cent to 27 deals from the 42 deals recorded on Thursday.
When trading activities closed for the day, Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 64.7 million units traded for N4.4 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 worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units valued at N415.7 million.
By Dipo Olowookere
Renewed interest in financial stocks and others lifted the Nigerian Exchange (NGX) Limited by 0.15 per cent on Friday.
Customs Street closed higher yesterday despite the 1.37 per cent loss recorded by the consumer goods sector as a result of profit-taking.
This was offset by gains in the other key sectors of the local bourse, as the insurance counter chalked up 1,14 per cent. The banking space appreciated by 0.90 per cent, the industrial goods segment grew by 0.46 per cent, and the energy sector expanded by 0.01 per cent.
Consequently, the All-Share Index (ASI) went up by 366.00 points to 242,593.31 points from 242,227.31 points, and the market capitalisation gained N235 billion to close at N155.594 trillion compared with the previous day’s N155.359 trillion.
The trio of International Energy Insurance, Abbey Mortgage Bank, and DAAR Communications improved by 10.00 per cent each yesterday to N7.26, N9.35, and N1.98, respectively, while Zichis advanced by 9.39 per cent to N32.38, with Sovereign Trust Insurance up by 8.70 per cent to N2.50.
On the flip side, Academy Press lost 9.84 per cent to quote at N8.25, University Press depreciated by 9.73 per cent to N5.10, Africa Prudential dipped by 2.63 per cent to N12.95, Chams crumbled by 2.44 per cent to N4.00, and International Breweries slipped by 1.59 per cent to N12.35.
Business Post reports that the market breadth index was positive during the session after recording 37 appreciating equities and 14 depreciating equities, implying strong investor sentiment.
Abbey Mortgage Bank led the activity chart with a turnover of 164.1 million units worth N1.5 billion, Ellah Lakes sold 76.7 million units for N767.2 million, Access Holdings transacted 44.8 million units valued at N1.1 billion, Linkage Assurance exchanged 23.0 million units worth N41.2 million, and The Initiates traded 20.2 million units for N562.1 million.
At the close of trades, market participants transacted 608.5 million units worth N32.0 billion in 53,826 deals versus the 588.5 million units valued at N27.9 billion executed in 57,352 deals in the previous session. This showed that the number of deals eased by 6.15 per cent, the volume of transactions rose by 3.40 per cent, and the value of transactions soared by 14.70 per cent.
By Adedapo Adesanya
The Naira further depreciated against the United States Dollar by N3.46 or 0.25 per cent to N1,362.21/$1 from N1,358.75/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 5.
However, it appreciated against the Pound Sterling in the same market window during the session by N4.47 to trade at N1,823.59/£1 compared with the previous day’s N1,828.06/£1, and gained N7.00 against the Euro to sell at N1,574.58/€1, in contrast to Thursday’s closing price of N1,581.58/€1.
For another trading session, the Nigerian Naira maintained stability against the Dollar in the parallel market and the GTBank forex counter on Friday at N1,375/$1 and N1,372/$1, respectively.
The Naira is expected to remain strong in the near term, backed by a rise in external reserves, which are nearing $50 billion, enhancing analysts’ confidence about its outlook in the second half of 2026.
Heightened global uncertainty has reduced the incentive for importers and corporates to demand FX, as cautious trade weighs on import needs. Analysts estimate a $40 billion net FX position for the year, a projection anchored in oil windfall gains.
As for the cryptocurrency market, prices remained depressed following a strong US jobs report that spurred markets to price in higher-for-longer interest rates, sending Treasury yields and the dollar up while hammering stocks, especially AI-related names. Crypto markets saw heavy leverage washouts with about $1.6 billion in positions liquidated over 24 hours.
Ethereum (ETH) gave up 4.9 per cent to trade at $1,584.68, Solana (SOL) fell by 3.3 per cent to $63.22, Bitcoin (BTC) crashed by 1.9 per cent to $61,333.23, Dogecoin (DOGE) slipped by 1.8 per cent to $0.0821, and Ripple (XRP) moderated by 1.8 per cent to $1.09.
Further, TRON (TRX) dropped 1.6 per cent to sell at $0.3197, Binance Coin (BNB) slumped by 1.0 per cent to $581.18, and Cardano (ADA) declined by 0.4 per cent to $0.1589, while the US Dollar Tether (USDT) gained 0.07 to sell at $0.9997, and US Dollar Coin (USDC) closed flat at $0.9998.
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