Nigerian Inflation Rate Drops to Lowest in Almost 5 Years

Nigeria’s inflation rate fell to the lowest in almost five years in March as the effect of higher fuel prices a year ago fell out of the calculation.

Inflation in Africa’s largest oil producer eased to 8.6 percent from 9.5 percent in February, the Abuja-based National Bureau of Statistics said today in an e-mailed report. The median estimate of 10 economists surveyed by Bloomberg News was 9 percent. Prices rose 0.7 percent in the month.

The Central Bank of Nigeria has kept its benchmark policy rate at a record 12 percent for nine consecutive meetings to keep prices in check and bolster the naira. The inflation rate has been below 10 percent, matching the central bank’s target, for three consecutive months. While Central Bank Governor Lamido Sanusi said he supports keeping the benchmark rate unchanged, more of the 12 members of the Monetary Policy Committee are pushing for a cut.

Inflation will probably remain at 9 percent to 11 percent this year, while March is probably the only month where the inflation rate was likely to fall under 9 percent, Sanusi said on March 24. Three MPC members voted for a reduction at the March 19 meeting, up from two in January.

“Although some will see this figure as evidence of a coming rate cut, we think that the MPC made it sufficiently clear that a fall in inflation will not be sufficient, at least not on its own,” Alan Cameron, an economist at CSL Stockbrokers Ltd. in London, said in an e-mailed response to questions after data release. “The MPC’s primary focus, in our view, will continue to be the foreign exchange rate.”

Naira Falls

The naira declined 0.2 percent to 158.4 per dollar in the interbank market by 6:10 p.m. in Lagos, the commercial capital. The currency may weaken further if the “relatively significant decline in the oil price in recent weeks” continues, Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said in an e-mailed note to clients after the data release.

“Clearly, the risks to market interest rates have shifted to the upside, and any cut in the monetary policy rate looks increasingly improbable in 2013,” Gadio said

Qua Iboe crude, a Nigerian grade, dropped 94 cents today, extending its decline to six days, and was trading at $100.75 a barrel at 5:54 p.m. in London.

The core inflation rate, which excludes agricultural products, rose 7.2 percent in March from a year earlier, down from 11.2 percent in February, the statistics office said. Food inflation eased to 9.5 percent from 11 percent.

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