Nigeria inflation jolt adds to pressure for steep rate hikes
Nigeria’s inflation rate climbed more-than-anticipated to a near 28-year high in January, adding to pressure on the central bank’s monetary policy committee to sharply raise interest rates at a Feb. 26-27 meeting — its first in seven months.
Consumer prices rose an annual 29.9% last month, up from 28.9% in December, the National Bureau of Statistics said on Thursday. The median estimate of 10 economists in a Bloomberg survey was for a 29.5% increase. Prices advanced 2.6% in the month.
The inflation rate has exceeded the central bank’s target range of 6% to 9% since 2015. The MPC raised rates by a combined 725 basis points to 18.75% between May 2022 and July, when it last met.
“The faster-than-predicted climb in Nigeria’s inflation in January will do little to change the central bank’s decision later this month — policymakers are widely expected to anyway front load hikes in February and March to rein in price gains and restore positive real rates,” Bloomberg Africa Economist Yvonne Mhango said.
A rise in food costs has been the main driver of inflation, and discontent over high living cost has triggered protests in several towns. Lawmakers summoned the central bank governor and the finance and budget ministers to explain what the government is doing to address those grievances.
Central bank governor Olayemi Cardoso, who took up his post in September, will chair his maiden policy meeting this month. President Bola Tinubu this week nominated five independent members who will sit on the rate-setting panel.
In a speech to a gathering hosted by the Nigerian Economic Summit Group last month, Cardoso said price pressures will moderate this year due to the bank’s inflation-targeting policy, and described the country’s naira currency as undervalued.
The bank has announced that it had cleared the foreign-exchange backlogs of 14 banks and allowed various sectors including manufacturing, aviation and petroleum to repatriate at least $2 billion in earnings, addressing issues that were weighing on the naira.
Annual food inflation quickened to 35.4% in January from 33.9% a month earlier, while core price growth — which excludes farm-produce and energy costs — accelerated to 23.6% from 23%.
Inflation spiked in the West African nation — where at least 40% of the population of more than 200 million live in extreme poverty — since foreign-exchange restrictions were relaxed in June and caused the naira to almost halve in value by the end of 2023. The end of a fuel subsidy weeks earlier caused transport costs to almost triple.
A currency devaluation last month is likely to weigh on inflation in coming months.
