The National Bureau of Statistics (NBS) recently released its November inflation and Consumer Price Index (CPI) data. As expected, headline inflation continued its upward trend, rising by 0.72% to 34.60% from 33.88% in October. This marks the third consecutive monthly increase and the highest inflation rate in 28 years. The good news however is that month-on-month inflation experienced a slight decline, easing by 0.002% to 2.638% in November from 2.640% in October. This marginal reduction in monthly inflation suggests that the growth in annual inflation is largely because of base effects. Hence, inflation could be fast approaching an inflection point.
Food Inflation climbs to 39.93%
On an annual basis, food inflation reached 39.93% in November, reflecting an increase of 0.77% from 39.16% in October. Similarly, month-on-month food inflation rose by 0.04% to 2.98% from 2.94% in October 2024. This uptick is largely because of increased demand ahead of the festive season.
Core Inflation
Core inflation, which excludes food and energy prices, increased on an annual basis, reaching 28.75%, up from 28.37% in October. However, on a monthly basis, it declined by 0.31% to 1.83% in November from 2.14% in October. This is an indication that inflation is driven principally by seasonal factors.
Urban and Rural Inflation
On an annual basis, both urban and rural inflation increased by 0.72% and 0.68% to 37.10% and 32.27% from 36.38% and 31.59%, respectively in October. However, on a monthly basis, urban inflation rose by 0.02% to 2.77% while rural inflation saw a 0.02% decline to 2.51%.
State-by-state Analysis
In November 2024, Bauchi (46.21%), Kebbi (42.41%), and Anambra (40.48%) recorded the highest inflation rates while Delta (27.47%), Benue (28.98%), and Katsina (29.57%) reported the lowest inflation rates.
Inflation outlook for 2025
We expect inflation to remain high in the near term, however, the pace of price growth is expected to slow with a potential for price deceleration in the near term. This would be driven by base effects, stable exchange rate and PMS prices. It is worth mentioning that the CBN’s recently launched Electronic Foreign Exchange Matching System (EFEMS), increased transparency in the FX market, leading to a sharp appreciation in the value of the Naira within a week. The parallel market rate strengthened by 4.85% to N1,633.00/$ before depreciating again to N1,650.00/$. The NAFEM rate also appreciated by 8.97% to N1,535.00/$ before weakening again to N1,544.20/$.
As the disinflation process begins, the CBN could halt its hawkish stance as early as Q2 2025 with the possibility of an easing monetary cycle commencing towards the end of the year. Trump’s potential tariff hike, lingering insecurity and infrastructure bottlenecks are major threats to this outlook.