Nigeria’s inflation up 0.19% to 22.4% in May

*As rate hits new 17-year high

The Nigeria’s headline inflation rate rose by 0.19 per cent to 22.14 per cent for the month of May 2023, National Bureau of Statistics (NBS) latest report has revealed.

This figure indicates an increase of 19 basis points compared to April’s headline inflation rate of 22.22 per cent, which represented a new 17-year high.

On a month-on-month basis, the inflation rate in May rose by 1.94 per cent, surpassing April’s rate of 1.91 per cent by 3 basis points.

Analysts had predicted the possibility of a new seventeen-year high for May’s inflation rate, attributing the rise to a three per cent decline in the exchange rate and an 18 per cent increase in the money supply.

Food inflation, which has been steadily rising for the past 15 months, reached 24.82% in May, up from 24.6 per cent in April. This increase reflects the impact of food shortages resulting from insecurity and seasonal factors.

Conversely, the Core sub-index, which excludes food and energy prices, decreased by 8 basis points from 20.14 per cent in April to 20.06 per cent in May, marking the first decline since February 2023.

An analysis of the contributions of various items to the acceleration of the headline index reveals that Food and Non-Alcoholic Beverages accounted for half of the year-on-year price growth recorded during the period.

Other sectors, such as Housing, Water, Electricity, Gas & Other Fuel, Clothing & Footwear, and Transport, also contributed to the increase in the price index.

It’s important to note that the May data does not reflect the impact of the 150% increase in petrol prices resulting from the removal of the Petroleum Motor Spirit (PMS) subsidy. The full effect of this adjustment is expected to be observable in June and perhaps more evident in July due to lags.

Moreover, there is cautious optimism about increased capital imports and foreign investment, which could support a gradual reduction in inflation during the last quarter.

However, uncertainties persist regarding an interest rate hike by the Monetary Policy Committee (MPC) when it meets next month, especially considering the pause in a rate hike by the US Federal Open Market Committee (FOMC) yesterday as well as the recent suspension of the central bank chairman and committee chairman.

Analysts believe the MPC would likely hold rates until clarity is obtained regarding the leadership of the central bank. President Tinubu, during his inauguration speech, signalled a likely departure from a hawkish policy stance while expressing concerns about the impact of high rates on businesses.