Today, we examine the drivers of headline inflation following our initial commentary on November’s headline reading last month. Similar to the rest of the world, Nigeria’s inflation rate has risen sharply in recent months, driven by the rising trend in food and core inflation. According to the National Bureau of Statistics (NBS) inflation report for November, inflation has now climbed for ten successive months. The latest was a 38bps m/m increase in the headline rate to 21.47% y/y from 21.09% y/y, as well as a 40bps rise in food inflation to 24.13% y/y in November.  We take a look at some of the specific drivers of inflation, following the Bureau’s recent publication of its price watch series.

In November, core inflation climbed by 49bps to 18.24% y/y, much higher than the 16bps increase in October.

The NBS selected food price watch for November shows that all 43 food items surveyed recorded y/y price increases. On average, food prices increased by 23.5%.

Soaring food price inflation is largely due to the structural challenges in the sector, including insecurity, poor infrastructure, and post-harvest losses due to inadequate storage facilities, amongst others.

Another major factor contributing to the rise in food prices is the shortage of foreign exchange for food importation.

Imported food inflation was up by 15bps to 18.23% y/y. The ongoing war between Russia and Ukraine has triggered the rise in prices of food and commodities globally, as seen in elevated inflation rates for many countries around the world.

The Automotive Gas Oil (diesel) price watch shows that the average retail price paid by consumers for diesel in November increased by 191.1% y/y to NGN808.87/litre.  

With respect to the National Household Kerosene price watch, we see that the average price paid for household kerosene also increased by 145.7% y/y to NGN1, 083.57/litre in November.

The NBS report on Liquefied Petroleum Gas (LPG) prices reveals that the average cost of refilling a 12.5kg cylinder increased by 39.3% y/y to NGN10,180.88. The rise in LPG prices is mostly due to supply limitations arising from Nigeria’s dependency on LPG imports.

Given that the price of PMS is largely subsidized by the government, its price increase was modest compared with other liquid fuels.

The Premium Motor Spirit (PMS) price watch data shows that the average price paid by consumers for PMS increased by 20.8% y/y and 3.7% m/m to NGN202.48/litre.

Looking ahead, we expect the PMS price watch data to show that PMS prices increased in December, due to the product's scarcity at fuel retail outlets across the country.

The NBS transport fare watch shows that the increase in the average fare paid by commuters for bus journeys within cities rose by 42.7% y/y on average. One-way tickets for domestic airfares also increased by 97.9% y/y.