August 17, 2020

Nigeria Economic Update (Issue 28)

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The inflation rate for the month of June rose to 12.56 percent from 12.40 percent in May1. The rise in inflation was driven by a rise in all components of the headline index, as food sub-index rose by 0.14 percent to 15.18 percent and the core sub-index rose by 0.01 percent to 10.13 percent. On a state level, headline inflation was highest in Bauchi (15.02%), Sokoto (14.88%) and Ebonyi (14.60%), while Cross River (10.95%), Lagos (10.78%) and Kwara (10.03%) recorded the slowest rise in headline inflation. The rise in the core sub-index was driven by an increase in the price of medical and hospital services, as well as motor cars and passenger transport by road which is intuitive given the upward pressure on the demand for these services. Given that the borders are still closed and restrictions to inter-state travel remain, we expect the demand for local medical services and road transport to remain high, thus causing suppliers to raise price and further increasing inflation. The monetary authorities will have to address the inflationary pressure while providing loans to the private sector with low interest rates to mitigate against the pandemic.

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