* Food MoM Falls 1.55% On Harvest, Yet Energy Cost and 23% Interest Keep Purchasing Power Low
Nigeria’s headline inflation fell to 14.63 per cent in September from 15.39 per cent in August, the fourth straight monthly decline, but the slowdown offers little relief to consumers grappling with low purchasing power, high energy costs and food prices that remain near 20 per cent.
Data released Thursday by the nation’s Bureau Statistics, (NBS) shows that while month-on-month inflation slowed sharply to 0.06 per cent from 0.71 per cent, food inflation at 19.59 per cent year-on-year is still rising almost five times faster than headline, and urban inflation accelerated to 0.53 per cent as transport and restaurants drove costs.
Market reality:
Inflation is falling on paper. Not in the market.
At 14.63 per cent in September, down from 15.39 per cent in August, Nigeria has now recorded four consecutive months of disinflation. Food prices even fell 1.55 per cent month-on-month on harvest of maize, guinea corn and local rice.
But a crate of eggs still sells N5,800, petrol N1,350-N1,430, diesel N1,100, and a bag of rice N85,000.
For a worker on N70,000 minimum wage, inflation at 14.63 per cent still means his salary buys less than it did last month.
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However, some analysts say the NBS print of 14.63 per cent validates CBN’s September 22 decision to cut MPR to 23 per cent from 26.5 per cent, but exposes the limit of monetary tightening without fiscal relief on energy.
With core inflation rising to 12.95 per cent and month-on-month core at 1.11 per cent, energy and logistics remain sticky, the same factors the September 18 Finance Ministry/CBN MoU pledged to tackle but has yet to deliver.
Implications:
The analysts say the development is good for rate cut cycle, as CBN is likely to cut again to 21% by Jan if trend continues.
But with CRR still at 45%, banks are not backing down as lending is hovering between 32 and 45% despite the MPR at 23%.
Also, with reserves at $55.25bn, it gives CBN room to cintinue to defend the naira at N1,330/$, helping to subsidise import costs.
On consumers experiencing low Purchasing power, the real wage is negative.
Consequently, with Inflation at 14.63%, it means wage growth of negative 5%. Therefore, N70k min wage buys 50 litres petrol at N1,400 vs 153 litres at N195 in May 2023.
On energy, diesel, petrol ceiling N1,350 still above August. 30-day discount not yet reflected in September data. Transport is 1.56% contributor, hence any PMS price hike reverses gains.
The analysts were unanimous in their submissions that the 14.63% is not price fall, but rather price increase at slower speed.
Until food MoM stays negative for 3 months and energy cost drops below N1,200, interest rates transmit, purchasing power will not recover.
According to them, September data is harvest effect, not policy success