According to the National Bureau of Statistics (NBS), the headline inflation moderated to 23.18% y/y in February (January: 24.48% y/y) based on the rebased CPI basket.
A breakdown of the data shows that food inflation eased to 23.51% y/y (January: 26.10% y/y), while core inflation edged up to 23.01% y/y (January: 22.59% y/y). On a month-on-month basis, consumer price growth slowed significantly to 2.04% (January: 10.7% m/m).
Food inflation fell sharply to 1.67% m/m in February (January: 10.3% m/m), reflecting a lower inflation rate across farm produce (-873bps to 1.77% m/m), processed food (-862bps to 1.61% m/m), and imported food (-976bps to 1.71% m/m).
The slowdown in food prices can be attributed to the appreciation of the naira – February average: NGN1,503.52/USD vs January average: NGN1,535.60/USD – which eased the cost of food imports, amid a decline in energy prices – particularly PMS and diesel – which helped reduce logistic costs.
Furthermore, we note that the main harvest period may have extended into Q1-25, following its delayed onset in December 2024, instead of the usual October start. This extension has likely supported the availability of farm produce during the period.
Similarly, core inflation declined to 2.52% m/m in February (January: 10.9% m/m), driven by a broad-based slowdown across key sectors, including Restaurants & Accommodation Services (-1,111bps to 3.03% m/m), Transport (-1,059bps to 2.18% m/m), Utilities (-491bps to 2.70% m/m), Education (-150bps to 3.38% m/m) and Clothing & Footwear (-1,790bps to 5.17% m/m).
We believe the moderation in the prices of core items was aided by stable naira and lower energy prices (-1,027bps to 1.36% m/m).
Inflation across the newly introduced indices, including Goods (-950bps to 1.29% m/m) and Services (-703bps to 3.38%), also declined during the period.
Maintaining Downward Trend
We anticipate a rise in consumer demand in March, driven primarily by Ramadan and Eid festivities, which could exert upward pressure on prices.
However, with reduced naira volatility and lower energy costs, inflationary pressures are expected to be more subdued than in the same period last year when sharp naira depreciation in Q1-24 triggered a steep price surge.
Therefore, we expect to see further moderation in the headline inflation numbers in March and over the near term.
Cordros
