Nigeria Inflation Slows to 43-Month Low as Food Costs Grow Less

(Bloomberg) -- Nigeria’s inflation rate fell to the lowest in more than three years in August as growth in food prices slowed.

Consumer prices rose 11.02% from a year earlier compared with 11.08% in July, the Abuja-based National Bureau of Statistics said Tuesday in a report published on its Twitter account. That’s the slowest since January 2016. Prices rose 0.99% in the month.

Key Insights

• The slowdown is unlikely to persuade the Central Bank of Nigeria to reduce its key rate next week as pressure on the naira persists. The Monetary Policy Committee unanimously voted to hold the rate at 13.5% in July with Governor Godwin Emefiele saying efforts to ensure price stability “remain sacrosanct” even as economic growth is important. The central bank targets inflation in a band of 6% to 9%.
• The food sub-index, which accounts for about half of the inflation basket, rose 13.2% in August compared with 13.4% in July. A recent directive from President Muhammadu Buhari for the central bank to stop dollar supplies for some food imports could push up prices, if shortages due to clashes between herders and farmers worsen.
• While the surge in oil prices after an attack on Saudi Arabia’s oil infrastructure will boost income for Nigeria, which generates more than 90% of its foreign exchange from crude, an increase in petroleum costs could add pressure to inflation because the West African nation imports most of its refined fuel.
• The central bank is caught between inflation that’s been above the target range for more than four years and an economy that’s still struggling to recover from a contraction in 2016. Growth in gross domestic product was lower than forecast and slowed for the second consecutive quarter in the three months through June. With limited scope to ease policy, the central bank has started forcing lenders through regulations and penalties to give out more credit in an attempt to stimulate growth.

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