The closure of Nigeria’s borders by the Federal Government continues ti take its toll on prices of basic commodities.
The National Bureau of Statistics (NBS), said in its report that headline inflation rose for the first time in three months in September, advancing by 22bps to 11.24% YoY to beat Bloomberg consensus estimate of 11.00% YoY and our 11.10% YoY forecast.
The price pressure was largely driven by an acceleration in food inflation (+34bps to 13.51% YoY in September), which constitutes over 50.0% of the consumer price index.
In the same vein, core inflation rose (+27 bps to 8.94% YoY) for the first time this year in September, to further stoke overall inflationary pressures.
This is attributed to food inflationary pressures, especially resulting from border closures in August 2019.
It is believed that the closure of several land borders, including the bustling Seme border, to combat food smuggling, led to reduced supply of imported food and increased demand for local food produce.
Specifically, the prices of popular food imports, such as rice and frozen foods, rose significantly during the review month, according to several market watchers.
The prices of domestic food produce such as garri, yam, cassava and local rice also increased materially in September on higher demand pressures.
Although one should note the risks to food inflation in prior communication (see our report titled
No doubt border closures may only offer temporary subsidy reprieve, only when expected main harvest season cushions to provide some offsetting impact.
Elsewhere, the first increase in core inflation in 2019 coincided with increases in Housing, Water, Electricity, Gas and Other Fuels (HWEGF); Transport; and the Miscellaneous Goods and Services sub-indices.
In a report by Proshare, it stated that it awaits the release the energy inflation figures, while noting the reported increases in the price of PMS across some key border towns following the deployment of security operatives to clamp down on smuggling.