Bucking the recent deceleration, headline inflation surprised negatively in the month of December 2021, as the rate increased by 22 bps to 15.62% YoY.
The inflation outturn was mainly driven by food inflation; as festive induced spending drove the MoM uptick to 2.20% (2x higher than November’s MoM food inflation rate). Furthermore, the food price pressures are linked to the continued uptrend in AGO prices (+9.4% MoM), which might have translated to higher haulage costs for agricultural produces.
Elsewhere, core inflation increased marginally by 2 bps to 13.87% YoY, reflecting continued price pressure on cooking gas and AGO.
Notable price increases were seen on 93% of the core inflation sub-components, with Alcoholic beverages, Tobacco and Kola (+55bps), and HWEGF (+55bps) leading the pack.
Analysts expect inflation to moderate for most of H1’22 due to the high base effect. However, the base effect should begin to wane in May 2022, leaving legroom for MoM price worries to become more evident.
These MoM pressures could reflect a projected naira depreciation to c.N440/$ at the I&E, continued parallel market premium, heightened security menace, and, more importantly, a likely increase in PMS and electricity prices.