Nigeria Rate-Cut Hope Dims as Fuel Dearth Keeps Inflation Sticky

(Bloomberg) -- Hopes for Nigeria’s first rate cut since 2015 dimmed as higher fuel costs in January countered a drop in food prices and kept inflation well outside the central bank’s target.

The consumer-inflation rate in Africa’s most populous nation fell for a 12th straight month in January, reaching 15.1 percent as food-price growth decelerated, the Abuja-based National Bureau of Statistics said in an emailed report Wednesday. While that matched the median estimate in a Bloomberg survey, it’s far outside the target band of 6 percent to 9 percent.

The central bank has kept the key rate at a record-high 14 percent since July 2016, trying to balance attempts to bring down inflation with boosting the economy. The government is looking at lower borrowing costs and increased public spending to spur activity and help the economy recover from a contraction in 2016, the first such performance in 25 years.

Gasoline-pump prices surged 28 percent to 191 naira ($0.53) a liter (0.3 gallon) in January from a year earlier, the statistics bureau said Tuesday. Its data include unofficial prices that were above the government’s current cap of 145 naira a liter. Despite pumping 1.8 million barrels a day of crude, Nigeria has to import almost all its fuel because of the decrepit state of its refineries.

“If the fuel issue is not contained in the next two to three months, we might see the inflation rate beginning to raise again,” Ogho Okiti, chief executive officer of Abuja-based Time Economics Ltd., said by phone. “Outside Abuja and Lagos, fuel is much higher than the official cap. Price increases for fuel feed into transport, and price increases in transport feed into everything else.”

It’s not yet certain though if the Monetary Policy Committee will hold a scheduled meeting in March, after it failed to meet in January because it lacked of quorum. Lawmakers refused to approve new members to the committee amid a political rift between them and President Muhammadu Buhari’s administration.

Food prices climbed 18.9 percent from a year earlier, the slowest annual increase since March.

Consumer-price growth in Africa’s most-populous nation and biggest oil producer can slow to 12.42 percent by the end of the year, Finance Minister Kemi Adeosun said in an emailed statement Sunday.

©2018 Bloomberg L.P.

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