Nigerian Inflation Slows to 12% as Flood Impact Recedes

Nigeria’s inflation rate fell in December for the first time in three months as the effects of flooding that damaged agricultural output began to recede.

Inflation in Africa’s largest oil producer slowed from 12.3 percent in November, the Abuja-based National Bureau of Statistics said today in an e-mailed report. Prices rose 0.8 percent in the month.

Core inflation, which excludes agricultural products, rose 13.7 percent in December from a year earlier, compared with 13.1 percent in the previous month, the second consecutive month in which the measure “deviated from the downward trend it exhibited” since July, the statistics bureau said.

Nigeria’s two biggest rivers, the Niger and the Benue, overflowed their banks last year, killing 363 people between July and October, according to the National Emergency Management Agency. Farming communities along river banks experienced the worst damage.

Food prices, which account for more than half of the consumer price index, rose 10.2 percent in December from a year earlier, down from 11.6 percent in November, the statistics bureau said. Prices rose in October and November from the impact of flooding between July and October, according to the statistics office.

While the risk of accelerating food inflation has been high since the floods, other factors for rising prices include housing, water, electricity and fuel costs, the central bank’s Monetary Policy Committee said in November. The inflation rate was expected to rise in December before easing toward 10 percent in January, Governor Lamido Sanusi said.

Sustainable Levels

The Monetary Policy Committee has kept its benchmark interest rate unchanged at 12 percent in its meetings last year to curb inflation and support the country’s currency, the naira. The National Assembly raised the benchmark oil price in this year’s budget by $4 to $79 a barrel, giving more funds to the government for spending. President Goodluck Jonathan hasn’t yet signed the budget or rejected it.

The MPC will want to be more certain that lower inflation is sustainable before it changes the benchmark rate, Razia Khan, the head of African economic research at Standard Chartered Plc in London, said in an e-mailed note to clients after the data release.

“With the threat of a higher benchmark crude price being adopted in the 2013 budget, we’re not certain that can be taken for granted for the moment,” said Khan, who predicts the bank will keep the policy rate unchanged in its Jan. 22 meeting.

(Updates with analyst comment starting in eighth paragraph.)
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