Inflation inches up to 12.20% in February 2020, increase in VAT yet to be captured

Nigeria’s headline inflation has recorded another increase from the 12.13 percent recorded in January to 12.20 per cent in February 2020. According to a report published by the National Bureau of Statistics (NBS) on Tuesday, food inflation increased marginally Year on Year to 14.90% in January 2020, compared to the figures obtained (14.85%) in January 2019.

In a flash note to investors Afrinvest said “The Consumer Price Index report released today showed that headline inflation increased to a 22-month high of 12.2 per cent Y-o-Y in February 2020, from 12.1 per cent in the previous month. The marginal rise in inflation suggests that the recent VAT increase is yet to be fully captured. Similarly, core inflation rose to 9.4% from 9.3% and food inflation was higher at 14.9% from 14.85%. The broad-based rise in inflation was despite a general moderation on a M-o-M basis for the first time since August 2019.  We suspect that the M-o-M moderation in consumer prices in February reflects the thinning-out effect of festive season purchases and land border closure. However, we believe this would be short-lived once consumer prices fully reflect the recent VAT increase. In addition, as a fallout from the effects of the COVID-19 pandemic, we expect exchange rate pressures and supply chain disruptions with trade partners to impact domestic consumer prices in the coming months”.

Core Inflation also rose to 9.43% in January 2020 compared to the 9.35% figures in January 2020. Earlier in January data from the NBS showed that food prices forced Nigeria’s inflation for the month to hit 12.13 percent, recording five months of consecutive increase. The increase is 0.15 percent points higher than the rate recorded in December 2019 (11.98 percent). The report from NBS stated that the composite food index rose by 14.85 percent in January 2020 compared to 14.67 percent in December 2019, and It revealed that the rise in the food index was caused by increases in prices of Bread and Cereals, Meat, Oils and fats, Potatoes, yam and other tubers and Fish. “In January 2020, food inflation on a year on year basis was highest in Sokoto (19.08%), Ogun (18.72%) and Nasarawa (17.07%), while Bayelsa (12.91%), Delta (11.57%) and Benue (11.33%) recorded the slowest rise.”