Inflation in Nigeria hits 17-year high


Annual inflation in Nigeria, Africa’s largest financial system, rose sharply in July on the again of hovering power, transport and meals prices, together with a fall in the worth of the naira currency.

The National Bureau of Statistics mentioned that in July inflation rose for the sixth consecutive month this yr to 19.6 per cent, up from 18.6 per cent in June and the best stage since September 2005.

The newest rise means inflation is now double the Central Bank of Nigeria’s goal of 9 per cent and raises the prospect of one other enhance in rates of interest subsequent month.

The statistics company pointed to a rise in the worth of gasoline and gas, in addition to air and street transport prices, together with meals costs. Food inflation rose to 22 per cent attributable to a rise in the price of bread and cereals, in addition to different meals merchandise reminiscent of potatoes, yam, meat, fish, oil and fats.

In an indication worth pressures have gotten broader, core inflation, which excludes the modifications in risky meals and power merchandise, quickened to 16.3 per cent.

The central financial institution has hiked rates of interest by 250 foundation factors since May to 14 per cent. Policymakers are as a consequence of meet on September 26.

Razia Khan, chief economist for Africa and the Middle East at Standard Chartered financial institution, mentioned Nigeria could have fewer instruments to fight hovering inflation than different nations.

“The action [tightening of monetary policy] remains overshadowed by greater reliance on the central bank’s financing of government,” mentioned Khan, referring to the Nigerian authorities’s announcement earlier this month that it owed $47bn to its central financial institution, in response to a report by the nation’s finances workplace.

The money is owed to the central financial institution as a part of the so-called Ways and Means Advance, a regulation contained in the central financial institution act that permits the financial guardian to fund the federal government when it experiences a shortfall in income.

Nigeria’s official oil earnings haven’t elevated regardless of the surge in oil costs following Russia’s invasion of Ukraine. Theft, pipeline vandalism, years of under-investment in infrastructure and the rising value of petroleum subsidies have prevented the nation from profiting.

Nigeria’s financial system is import-dependent and depends closely on the US greenback. But importers have struggled to entry {dollars} due to tight restrictions.

The central financial institution stopped promoting {dollars} to retail foreign exchange merchants in July 2021 to ease stress on its greenback reserves and assist its artificially low alternate charges. The naira is reported to be overvalued by between 10 per cent and 20 per cent towards the buck. The lack of greenback funds from the central financial institution has raised the price of importing items, forcing companies to boost costs.

“Until official forex markets see greater turnover, the difficult to regulate parallel market, itself prone to overshooting, will continue to play a disproportionate role in price-setting behaviour,” mentioned Khan.

Most importers entry {dollars} on the black market, the place the currency is freely traded. Due to important demand and restricted provide, the naira has plunged to historic lows towards the buck in current months. The central financial institution says demand is high from producers and due to Nigerians in search of to pay faculty and hospital charges overseas.

Inflation is predicted to rise to greater than 20 per cent subsequent month, in response to Michael Famoroti, head of intelligence at Lagos-based firm Stears.

The financial system and rising insecurity will probably be key marketing campaign points when presidential candidates formally start canvassing for votes in September to exchange the term-limited Muhammadu Buhari as Nigeria’s president. Elections are scheduled to happen in February.

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