Nigeria’s consumer price inflation dropped to 32.15% in August 2024, marking a second consecutive decline driven by CBN’s interest rate hikes. Food inflation eased, and government measures helped stabilize prices, positively impacting the equities market.
Nigeria’s consumer price inflation (CPI) decreased for the second consecutive month in August 2024, reaching 32.15% year on year, down from 33.40% in July 2024. This decrease was primarily driven by the Central Bank of Nigeria‘s recent interest rate hikes.
The moderation in the headline inflation rate reflects the CBN’s inflation-targeting measures through policy tightening, including raising interest rates to 26.75% at its last Monetary Policy Committee (MPC) meeting. Fiscal measures have been implemented to mitigate inflationary pressures caused by rising food prices, the removal of petrol subsidies, and the depreciation of the Naira.
On a month-on-month basis, headline inflation stood at 32.22%, slightly lower than the 32.28% recorded in July 2024. Food inflation, the largest contributor to the headline figure, stood at 37.52% year-on-year, down from 39.53% in July 2024.
The improved agricultural output during the harvest season played a significant role in stabilizing food prices. Government initiatives, including a six-month suspension of import duties, VAT, and tariffs on staple food items and raw materials, have also contributed to easing food price pressures while aiming to boost domestic food production.
In August 2024, the core inflation index, which excludes volatile items like agricultural produce and energy, stood at 27.58% year-on-year, a marginal increase from 27.47% in July 2024. Regional variations in year-on-year all items inflation were observed, with Bauchi, Kebbi, and Jigawa experiencing the highest rates.
The Stock Market
The Nigerian equities market experienced a bullish sentiment, with the NGX All-Share Index (ASI) rising by 0.81% week-on-week, reaching 31.39%. This was driven by positive sentiment and the latest inflation data, which moderated for the second consecutive month to 32.15%.
The market’s year-to-date return was also raised to 31.39%. However, trading activity declined, with average traded volume falling by 28.02% to 1.86 billion units, traded value dropping by 24.92% to N38.44 billion, and total deals decreasing by 20.56% to 40,211 trades for the week.
Sectoral analysis revealed resilience, with the Banking Index leading sectoral gains, followed by the Insurance sector and Oil & Gas sector. The top gainers for the week were CAVERTON (+45.3%), FIDELITYBK (+24.2%), FIDSON (+21.8%), VITAFOAM (+21.5%), and MEYER (+20.9%).
Conclusion
Inflation has eased to 32.15% due to a downward shift in headline and food inflation trends. This is due to the Central Bank’s aggressive monetary policy, which has elevated interest rates to 26.75%, and government measures to stabilize food prices. Despite challenges like the removal of fuel subsidies and Naira depreciation, strategic policy interventions have helped mitigate the adverse effects.
In September, inflation is projected to ease further to 30.95% due to increased food supply from the harvest season. The Monetary Policy Committee may adopt a wait-and-see approach to assess the necessity of further tightening or if the current policy trajectory is sufficient to maintain price stability. The equity market is expected to continue bullish sentiment, driven by portfolio rebalancing and strategic positioning in value-driven stocks.
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