Highlights

Report released by the National Bureau of Statistics (NBS), showed that Headline Inflation in June 2024 advanced by 24 basis points on a year-on-year basis to 34.19% (May 2024: 33.95%). This upward movement was driven by both Food Inflation and Core Inflation which climbed to 40.87% and 27.40% respectively (May 2024: 40.66% and 27.04%).

Notably, Headline Inflation halted its 3-month streak of month-on-month declines, as it ascended to 2.31% in June 2024 (May 2024: 2.14%). This trend was also reflected in its components, with Food Inflation moving up to 2.55% (May 2024: 2.28%), and Core Inflation rising to 2.06% (May 2024: 2.01%).

Outlook

Notably, the economic reforms which includes removal of fuel subsidy and official devaluation of Naira began manifesting in the July 2023 inflation figures, leading to a sustained upward pressure year-on-year. Building upon this elevated starting point, we opine that inflation has reached its peak, and barring any shock, we expect a 45-basis point moderation in Headline Inflation. Hence, we expect July 2024 Headline Inflation to settle at 33.74%.

Policy Expectation

Given the elevated inflation rate in June 2024, we anticipate that the monetary policy committee will remain hawkish albeit less aggressively. Notably, the rate hikes implemented so far is to achieve price stability and most importantly, is to narrow the negative real return to attract foreign investors. Despite the higher inflation in June 2024, we posit that the approved World Bank loan serves as a respite to the monetary authorities in their pursuit of FPI.

To this effect, we anticipate either a HOLD stance or a 25-100 basis points increase in the monetary policy rate (MPR) at the upcoming meeting scheduled for June 22^nd-23^rd, 2024.

Click here “June 2024 Inflation – Year-on-Year Moderation in Sight” to view the full report.