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Nigeria February Inflation Slows First Time in Over a Year

Updated on
  • Inflation rate decreased to 17.8% from 18.7% in previous month
  • Central bank due to review 14% key lending rate next week

Nigeria’s inflation rate fell for the first time in 16 months in February as the cost of items other than food eased.

Inflation in Africa’s most-populous nation slowed to 17.8 percent from 18.7 percent in January, the Abuja-based National Bureau of Statistics said in an emailed statement Tuesday. All 13 economists in a Bloomberg survey forecast a drop in the rate, with a median estimate of 17.2 percent. Prices rose 1.5 percent in the month.

“We think inflation peaked, and it will continue coming down but stay above the government’s target partly because the currency is a lot weaker than it was last year,” John Ashbourne, an economist at Capital Economics Ltd., said by phone from London.

The inflation rate has climbed above the government’s target of 6 percent to 9 percent, reaching the highest in more than 11 years after a drop in prices and output of oil, Nigeria’s biggest export, led to a shortage of foreign currency needed to import everything from gasoline to food. The Central Bank of Nigeria’s removal of a peg in June caused the naira to lose almost 40 percent of its value against the dollar, making imports pricier. The regulator continues to block importers of some products from the official foreign-currency market, forcing them to buy dollars at 30 percent more expensive from the black market.

Food inflation accelerated to 18.5 percent from 17.8 percent, driven by increases in the cost of bread, cereals, meat and fish. Core inflation, which excludes the prices of farm produce, slowed to 16 percent from 17.9 percent.

The central bank increased its key lending rate to a record of 14 percent in July to help fight price increases even as the economy was under pressure, ultimately shrinking 1.5 percent in 2016, the first full-year contraction in a quarter of a century. Governor Godwin Emefiele said consumer-price growth will start to subside as the economy begins to recover and the naira’s exchange rate stabilizes. The Monetary Policy Committee is scheduled to review interest rates next week.

The MPC “will probably leave rates unchanged next week, but cut later in the year to support the economy,” Ashbourne said.

The government released an economic blueprint this month, targeting inflation at less than 10 percent by 2020. The plan proposes this will be achieved partly by increasing food production and reducing uncertainty in the nation’s foreign-exchange policy.

Improved foreign-currency supply by the central bank “has given rise to greater optimism over the likely trajectory of foreign-currency policy, as well as the inflation outlook,” Razia Khan, head of Africa macro research at Standard Chartered Plc in London, said in an emailed note before the data were released. “Improved foreign-currency availability is seen as key to any sustained deceleration in inflation.”

— With assistance by Simbarashe Gumbo

(Updates with economist’s comment in third paragraph.)
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