Nigeria February Inflation Unexpectedly Slows to 11.9%

Nigerian inflation unexpectedly slowed to 11.9 percent in February as record interest rates and a partial removal of gasoline subsidies squeezed demand.

Inflation in Africa’s top oil producer slowed from 12.6 percent a month earlier, the Abuja-based National Bureau of Statistics said on its website today. The median estimate in a Bloomberg survey of eight economists was 13.2 percent. Prices rose 0.3 percent in the month.

President Goodluck Jonathan reduced subsidies in January, retreating from a plan to completely remove them after a weeklong general strike in protest. The Central Bank of Nigeria kept its benchmark interest rate at a record high of 12 percent for a second consecutive meeting on Jan. 31, after raising it six percentage points since September 2010 to curb inflation and bolster the currency.

The subsidy cut had a “contractionary impact” on real disposable incomes, said Razia Khan, the London-based head of Africa research at Standard Chartered Plc, who described the slowdown in inflation as a “huge surprise.” The central bank’s policy tightening last year “is still feeding its way through the real economy,” she wrote in an e-mailed note today.

Food price inflation eased to 10 percent from 13.1 percent a month earlier. Food accounts for about half of the consumer price index.

‘Support Bonds’

The central bank said in January that it expects inflation to accelerate to as high as 14.5 percent in the first two quarters, before slowing below the target level of 10 percent in 2013.

After today’s announcement, Absa Capital, a Johannesburg-based investment bank owned by Barclays Plc, cut its inflation projections. Strategists led by Ridle Markus said in an e-mailed note that they now expect inflation to peak close to 14 percent early in the third quarter, from an earlier prediction that it would reach almost 15 percent by the middle of the year.

The drop in inflation “almost guarantees” that the bank will keep interest rates unchanged at tomorrow’s monetary policy meeting, said Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, in an e-mail. Lower inflation “coupled with the probable neutral interest-rate decision, should also support bonds in the secondary market.”

Governor Lamido Sanusi said in January that the central bank may need to raise the benchmark lending rate if lawmakers increase spending above levels proposed by the government. Nigeria’s National Assembly voted on March 15 to raise government spending by about 6 percent above the budgeted amount.

(National Bureau of Statistics corrects February annual percentage change for food in story published March 19.)
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