Nigeria’s Rampant Inflation Set to Ease After Peaking at 34%
Nigerian inflation probably decelerated for the first time in 19 months, ushering in some relief from a cost-of-living crisis that has fanned deadly protests.
Data due Thursday will show the annual inflation rate slipped to 33.3% in July from 34.2% a month earlier, according to the median estimate of eight economists in a Bloomberg survey.
That’s as the impact on prices of a currency devaluation and partial removal of fuel subsidies last year begins to wane. The measures were part of reforms introduced by President Bola Tinubu after he took office in May 2023 to attract investors, float the currency and ease budget pressures.
Economists are optimistic that the letup will mark the start of disinflation following an aggressive monetary tightening cycle that has raised the key interest rate by 15.25 percentage points to 26.75% since 2022.
What Bloomberg Economics Says…
“Nigeria’s inflation data will likely show smaller price gains in July. The annual inflation reading will probably mark the first slowdown in this cycle, after peaking in June. Looking ahead, annual inflation will likely slow to around 30% at the end of 2024, helped by a stabilizing naira,” said Yvonne Mhango.
“We see inflation falling to 27% by year end” and averaging 32% in 2024, said Ibukunoluwa Omoyeni, economist at Vetiva Capital Management Limited. “Barring any black swans, we believe the monetary policy committee may stay put on rates for the rest of the year” he said.
The disinflation trend should also be helped by plans to reduce the cost of food, including a 180-day window to import wheat and corn duty free, the commencement of domestic refining of gasoline and a stable foreign exchange environment, Omoyeni said.
‘We are Hungry’
A slowdown in inflation would be welcome by Nigerians who have borne the brunt of Tinubu’s reforms. Crowds chanting “we are hungry” marched through the streets of several cities earlier this month demanding the government fully reinstate fuel subsidies, cut electricity tariffs and reduce duties on imports. A clampdown by security forces left at least 13 dead.
Still, many economists don’t see inflation moderating significantly over the rest of the year because of weighty headwinds including persistent insecurity, political uncertainty, and holiday spending in the last quarter, said Ikemesit Effiong, partner at SBM Intelligence.
“Government’s efforts to reduce tariffs on certain import items will take time to percolate into the wider market, particularly with reports of slow implementation,” he said.
