February 2021 CPI Report: Headline Inflation hits a 4-year High

 

The Consumer Price Index (CPI) data for February as released by the NBS reveals an unrelenting uptrend in the headline inflation rate for the 18th consecutive month as it rose to 17.3%.

Although headline inflation represents the highest level since February 2017, month-on-month inflation flattened at 1.5% (similar to January level).
The food basket remained the pressure point for headline inflation, rising y/y to 21.8% in February from 20.6% the previous month. The m/m data however revealed a slower pace of increase as the food index rose marginally by 6 basis points month on month to 1.9%.

Afrinvest analysts believe that the sustained insecurity in the food-producing regions of the country, the farmer-herder clash, and the recent blockade of food-conveying trucks from the north fueled the increase in food prices, especially considering that food inflation moderated in January.

Core inflation also increased 53 basis points year on year in February to 12.4%, the highest they have seen since June 2017. The month on month trend however signifies a slowdown, moderating 5 basis points month on month to 1.2% in February as the effect of the increased electricity tariff wears out.
They believe the risks to inflation remain on the upside over the mid-term. “Food prices would continue to pressure headline inflation as we have exited the harvest season. This is especially as food insecurity issues abound amidst unrelenting farmer-herder clash and may disrupt planting season. We may also see increased pressure on core inflation if a new pricing template for PMS is adopted amidst higher crude oil prices.”