Photographer: George Osodi/Bloomberg

Nigerian Inflation Rate Climbs for 15th Month in January

Updated on
  • Food inflation accelerated to 17.8% from 17.4% in December
  • Inflation rate of 18.7% highest since September 2005

Nigeria’s inflation rate climbed for a 15th consecutive month in January even as the central bank kept borrowing costs at a record high to control price growth.

Inflation in Africa’s most-populous nation quickened to 18.7 percent from 18.6 percent in December, according to an e-mailed statement from the Abuja-based National Bureau of Statistics. That’s the highest rate since September 2005, according to central bank data. The median of 18 economists in a Bloomberg survey was for the rate to stay unchanged. Prices rose 1 percent in the month.

Foreign-currency shortages after the Central Bank of Nigeria removed a currency peg in June, causing the naira to lose almost 40 percent of its value against the dollar, has pushed the inflation rate to the highest in more than a decade as the costs of imports surged. The central bank continues to block importers of 41 items it deems non-essential from the official foreign-currency market, forcing them to source dollars from the black market at more than 30 percent the inter-bank rate, adding more pressure to the prices consumers pay for food to fuel.

“Foreign currency shortages are still a serious problem, and the naira has continued to fall on the parallel market,” John Ashbourne, a London-based economist at Capital Economics Ltd., said in e-mailed responses to questions. “The widening gap between the official and the parallel rate, which is now almost as wide as it was before the 2016 devaluation, is an indication that demand is significantly outstripping supply in the official market.”

Annual food inflation accelerated to 17.8 percent from 17.4 percent in December, driven by increases in the prices of bread and cereals, meat, oil and fats and fish, the statistics office said.

Sluggish Economy

The high inflation rate put pressure on policy makers to keep the key rate at a record high of 14 percent for a third consecutive meeting last month. The Monetary Policy Committee left borrowing costs unchanged even as the International Monetary Fund estimates the economy probably shrank 1.5 percent in 2016, the first full-year contraction in more than two decades, and will expand less than 1 percent in 2017.

Governor Godwin Emefiele has rejected calls from Finance Minister Kemi Adeosun to lower rates to support growth, arguing that loosening policy may worsen the inflationary situation. Emefiele has urged President Muhammadu Buhari’s administration to approve the 2017 budget and spend money to boost factory and food production, unlike last year when expenditure plans were delayed for almost five months.

“We don’t think these figures will change the monetary stance,” Michael Famoroti, an economist at Lagos-based Vetiva Capital Management, said by phone. With the focus on their core mandate of managing price growth, “we think the MPC will want to stay on its current path for a longer time,” he said.

Capital Economics still expects rates will be raised later this year, but the timing is difficult to predict, according to Ashbourne.

The naira weakened 0.16 percent to 316.0 per dollar at 3:23 p.m. in Lagos on Wednesday.

Nigeria’s lawmakers will next week resume debate on Buhari’s proposed 2017 budget of a record 7.3 trillion naira ($23 billion). The proposed spending plans have a deficit of 2.36 trillion naira, 46 percent of which will be financed through foreign borrowing. The government sold $1 billion of dollar bonds on Feb. 9, and plans to apply for the same amount in a loan from the World Bank. The African Development Bank approved a $1 billion loan for Nigeria, of which it disbursed $600 million in November.