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

Naira Trades N1,354 Per Dollar at NAFEX

Published

9 minutes ago

10/02/2026

Adedapo Adesanya

By Adedapo Adesanya

The first trading of the week at the Nigerian Autonomous Foreign Exchange Market (NAFEX) ended bullish for the Naira as it gained N11.93 or 0.87 per cent against the US Dollar on Monday, February 9, to trade at N1,354.26/$1 compared with the previous day’s N1,366.19/$1.

It also appreciated against the Pound Sterling in the official market during the session by N12.03 to settle at N1,845.72/£1 versus last Friday’s closing price of N1,857.75/£1, but depreciated against the Euro by 69 Kobo to quote at N1,613.19/€1, in contrast to the N1,612.52/€1 it was exchanged last Friday.

At the GTBank forex desk, the Nigerian Naira appreciated against the Dollar yesterday by N4 to close at N1,379/$1 versus the previous rate of N1,383/$1, and at the parallel market, it was flat at N1,450/$1.

The fortification of the Nigerian currency in the currency market on Monday was driven by forex liquidity, strong oil receipts, and flows from foreign investors attracted by the high yields on the country’s debt market.

Speaking at a forum on Monday, the Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, declared that the bank’s reforms have established economic stability, evidenced by a significant reduction in inflation and growing external reserves, which he stated stood at $49 billion as of February 5, 2026.

He also highlighted the stability of the FX market, noting that the CBN is now accumulating foreign exchange from the market to enhance sustainability.

“By that, I mean that we now allow the market to generally find its level; many times, the Central Bank itself goes in to buy foreign exchange. The premium between the official and parallel market rates has collapsed to under 2 per cent,” Mr Cardoso stated.

The CBN chief said the reforms of the monetary authority—anchored on disinflation, FX market normalisation, and financial-system resilience—are already strengthening real-sector confidence.

As for the cryptocurrency market, it was in a recovery mode as investors took advantage of the drop in prices to add to their portfolios.

The pullback followed a turbulent few days in which Bitcoin (BTC) plunged to as low as $60,000 before rebounding. It rose 0.5 per cent on Monday to $70,415.57, as Ethereum (ETH) gained 0.9 per cent to trade at $2,116.42.

Further, Ripple (XRP) improved by 1.4 per cent to $1.44, Litecoin (LTC) expanded by 0.8 per cent to $54.66, Solana (SOL) grew by 0.5 per cent to $87.11, and Cardano (ADA) added 0.2 per cent to settle at $0.2704.

On the flip side, Binance Coin (BNB) slumped 0.6 per cent to $638.34, and Dogecoin (DOGE) weakened by 0.3 per cent to $0.0963, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.

Economy

Crude Oil Soars as US Cautions Vessels Near Iran

Published

37 minutes ago

10/02/2026

Adedapo Adesanya

By Adedapo Adesanya

Crude oil gained more than 1 per cent on Monday after the United States issued an advisory to US-flagged vessels to stay as far as possible from Iranian territory while passing through the Strait of Hormuz and Gulf of Oman.

The price of Brent crude was up 99 cents or 1.5 per cent during the session to $69.04 a barrel, while the US West Texas Intermediate (WTI) crude rose 81 cents or 1.3 per cent to settle at $64.36 per barrel.

The US Department of Transportation (DOT) Maritime Administration yesterday noted that vessels going through the Strait of Hormuz and Gulf of Oman have historically faced the risk of being boarded by Iranian forces, including as recently as February 3.
The agency advised U.S.-flagged ships to stay close to Oman while eastbound in the Strait of Hormuz.

The move renewed concerns that tensions between the US and Iran could lead to oil supply disruptions. About a fifth of the oil consumed globally passes through the Strait of Hormuz between Oman and Iran.

US President Donald Trump has threatened to attack, citing possible executions of protesters, and saying “help is on its way.” He ordered the USS Abraham Lincoln aircraft carrier and a flotilla of accompanying ships to the region.

In June, the US attacked Iranian nuclear facilities at the end of a 12-day Israeli bombing campaign.

Iran’s foreign minister said on Saturday the country will strike US bases in the Middle East if attacked by American forces, which have built up their naval presence in the region.

Investors were also monitoring efforts by Western governments to curb Russia’s income from oil exports that support its war in Ukraine.

The European Commission has proposed a sweeping ban on any services that support Russia’s seaborne crude oil exports, in fresh efforts to reduce revenues that help Russia’s war against Ukraine.

Refiners in India, once the biggest buyer of Russian crude, are avoiding purchases for delivery in April. Market analysts noted that if India fully stopped purchasing this crude, it would boost oil prices.

Meanwhile, Tengiz oilfield in Kazakhstan has returned 60 per cent of its peak production and was pumping at a rate of 550,000 barrels per day as of Sunday, following a forced shutdown for half of January due to a fire.

Tengiz, which is operated by a consortium led by US supermajor Chevron, is expected to reach peak levels of oil output of about 950,000 barrels per day by February 23.

Economy

Investors Begin New Week on NGX With N1.424trn Rise in Wealth

Published

1 hour ago

10/02/2026

Dipo Olowookere

By Dipo Olowookere

It was a positive start to the week for stock investors in Nigeria as they grew their wealth by 1.29 per cent on Monday amid a hunt for dividend-paying equities.

Business Post reports that three of the five sectoral indices ended in green, with the industrial goods space leading with a 4.76 per cent appreciation, and the energy counter up by 1.29 per cent, while the consumer goods index gained 0.74 per cent.

However, due to profit-taking in the financial services ecosystem yesterday, the banking counter went down by 0.04 per cent, and the insurance sector lost 0.03 per cent.

When the closing gong was struck, the All-Share Index (ASI) soared by 2,218.73 points to 173,946.22 points from 171,727.49 points, and the market capitalisation surged by N1.424 trillion to N111.659 trillion from N110.235 trillion.

The trio of May and Baker, CAP, and DAAR Communications improved by 10.00 per cent during the session to close at N43.45, N90.20, and N2.09 apiece, while RT Briscoe gained 9.98 per cent to trade at N13.89, with Deap Capital growing by 9.97 per cent to N7.50.

Conversely, Eunisell lost 9.98 per cent to settle at N134.85, Tripple Gee slumped by 8.90 per cent to N6.65, Abbey Mortgage Bank crashed by 8.03 per cent to N13.75, Austin Laz declined by 7.41 per cent to N5.00, and Haldane McCall slipped by 6.56 per cent to N3.99.

On the first trading day of the week, 59 stocks ended on the advancers’ log, and 26 stocks finished on the laggards’ table, representing a positive market breadth index and strong investor sentiment.

Despite the gains, the activity level waned on Monday as the trading volume and value decreased by 18.73 per cent and 35.27 per cent, respectively, while the number of deals increased by 29.32 per cent.

A total of 775.2 million equities worth N27.9 billion exchanged hands in 65,960 deals yesterday compared with the 953.8 million equities valued at N43.1 billion traded in 51,005 deals last Friday.

Access Holdings was the busiest stock for the session with a turnover of 67.1 million units worth N1.6 billion, Zenith Bank sold 46.2 million units valued at N3.4 billion, Secure Electronic Technology traded 43.9 million units for N47.9 million, Veritas Kapital exchanged 39.4 million units worth N91.6 million, and Mutual Benefits transacted 33.9 million units valued at N145.7 million.