Interest rates kept at nine-year high of 14% in October
By: Jamine I.A.O
This is the 11th month and the Nigerian inflation accelerated consecutively as food prices rises, strengthening the case for the central bank to maintain a tight monetary stance even as the economy is contracting.
The inflation rate in Africa’s most populous country Nigeria
increased to 17.9% from 17.6% in August, the Abuja-based
National Bureau of Statistics said in an e-mailed released on Friday.
Prices rose 0.8 percent from the previous month, compared with 1% from
July to August. But the median of 15 economist estimates compiled by
Bloomberg was far higher with an increase of 18%.
The Inflation rise has been partly due to dollar shortages
which is caused by the 197-199 naira peg to the U.S. currency by the CBN, which increased cost of
importation, increase in costs of products such as rice and electronics. That,
coupled with shortages of power as well as a drop in the price and
production of crude oil, Nigeria’s biggest export and revenue-earner,
weighed on output and consumption. Foreign-exchange shortages have
persisted even after the peg was removed on June 20.
The September data “came in line with expectations,” and
showed that month on month inflation was easing, An
economist at Lagos-based Vetiva Capital Management, said by phone on
Friday. “It allows the monetary committee to continue its current
monetary stance. That means maintaining a tight monetary stance which is
not necessarily a continuation of tightening.”
Food Inflation
On Sept. 20, Nigeria’s Monetary Policy Committee led by
the Governor of the central bank of Nigeria, Godwin Emefiele rejected calls by Finance Minister
Kemi Adeosun to lower interest rates, and instead kept them unchanged
at the highest level in nine years, at 14 percent. Adeosun said lower
rates would support an economy forecast by the International Monetary
Fund to contract by 1.7 percent in 2016, the first full-year recession
in 25 years.
Food inflation accelerated to 16.6 percent in September
from 16.4 percent in August, as the cost of food items such as meat, bread, cereals and oil
increased, the statistics agency said. The average price for a liter of gasoline was 146.3 Naira , a drop from 147.3
naira in August.
According to forecast: “We see headline inflation at 18 percent year-on-year in
December, and retreating to 10.3 percent one year later on positive base
effects,” By Lagos analysts at
Lagos-based FBN Quest.
