This week, we x-ray the November 2024 Consumer Price Index (CPI) published by the NBS. According to the bureau, Nigeria’s headline inflation rate increased by 70bps in the penultimate month of 2024 to 34.6% y/y, marking the third consecutive monthly increase and the highest in over two decades. On a m/m basis, the headline rate cleared at 2.6% (same as October) bringing the YTD monthly average reading to 2.5% as against the 1.8% projected by the FG at the start of the year (implying annualised rate of 33.0% vs 21.4% projected by the FG).
The increase in the headline rate was driven by intensified pressure on both the food and core inflation sub-baskets. For context, the food inflation rate nudged higher by 77bps to 39.9%, the highest in five months. Meanwhile, its m/m print came in at 2.98%, implying a 4bps increase from the prior month.
We highlight that the sustained pressure on the food inflation basket is not unconnected to the disappointing main harvest performance beginning from September 2024, occasioned by the negative impact of flooding in 31 states in Q3 (over 700,000 hectares of cropland – roughly equivalent to the land mass of Abuja, destroyed according to FEWS-NET), as well as the protracted legacy challenges of insecurity and weak mechanisation.
The core inflation sub-basket rate which excludes volatile food and energy goods rose 38bps to 28.8% y/y, the highest since the turn of the millennium. Meanwhile, on a m/m basis, the core inflation rate eased 30bps to 1.8%, the lowest since December 2023. We note that the modest decline in the m/m core inflation rate was driven by the slight moderation in average PMS prices (down 3.8% m/m to ₦1,140/litre) and the modest 20 and 30bps rebound in NGN/USD rate at the official and parallel market segments in the month to ₦1,672.69/$ and ₦1,720.00/$, respectively.
On the back of these developments, transportation and communication prices rose mildly by 18.5ppts and 0.4ppts in November compared to 20.1ppts and 0.8ppt increases in the prior month indicies.
Looking ahead, we forecast the headline rate to temper by 25bps to 34.5% in December, driven mainly by the high base year impact on the food sub-basket and a further modest recovery in NGN/USD rate to below ₦1,600/$ levels. Against this backdrop, we estimate the headline inflation rate for 2024 to average 33.1%, an 11.7ppts outrun of FG’s projection for the year.
Domestic Equities Market: Local Bourse Surpasses 100,000 points… ASI up 1.8% w/w
This week, Aradel Holdings Plc (“Aradel”) announced the ministerial approval for the acquisition of Shell Petroleum Development Company (SPDC) divested assets by Renaissance Africa Energy Limited (“Renaissance”) – a consortium of five companies including ND Western, Aradel, First E&P, Waltersmith and Petrolin. Meanwhile, the domestic market sustained its bullish momentum with the NGX-ASI index recording a w/w gain of 1.8% to print at 101,129.09 points.
As a result, YTD return spiked to 35.2% (previously: 32.9%) while market capitalisation improved 1.8% (₦1.1tn) to ₦60.3tn. Activity level varied w/w as volume traded decreased 6.6% to 515.6m units while value traded rose 84.4% to ₦16.5bn. WEMABANK (266.8m units), ETRANZACT (140.5m units), and UBA (78.0m units) were the top traded stocks by volume for the week while TRANSCOHOT (₦7.5bn), OANDO (₦3.7bn), and SEPLAT (₦3.2bn) led by value.
Across our coverage sectors, weekly performance was positively skewed as four indices gained while the other two lost. Leading the gainers, the Insurance and Banking indices pared weekly gains of 8.8% and 3.2% respectively due to price appreciation in WAPIC (+26.9%), SUNUASSURE (+22.8%), GTCO (+7.6%) and ZENITH (+4.2%).
Following, the Consumer Goods and Oil & Gas indices gained 2.9% and 1.0% w/w, respectively, due to price uptick in HONYFLOUR (+31.5%), UNILEVER (+8.9%), MRSOIL (+36.4) and ARADEL (+20.7%). On the flip side, sell offs in BUACEMENT (-2.1%), WAPCO (-2.1%) and MTNN (-0.3%) pulled the Industrial Goods and AFR-ICT indices down by 0.9% and 0.1% w/w respectively.
Investor sentiment, as measured by market breadth, improved to 0.5x from previous week’s 0.2x as 60 stocks gained, 24 lost while 66 were unchanged. The top performing stocks for the week were MRSOIL (+36.4%), ETERNA (+32.4%), and HONYFLOUR (+31.5%) while JOHNHOLT (-18.7%), MULTIVER (-18.6%), and UPL (-16.3%) were the top underperforming stocks. In the final trading week of the year, we expect market to record mild gains as trading winds up for the year.
Afrinvest
