Nigeria CPI Slows for 15th Month, Expanding Rate-Cut Room

(Bloomberg) -- Nigerian inflation eased for the 15th straight month in April, moving closer to the central bank’s target and expanding room for monetary-policy makers to consider trimming their key interest rate.

Consumer-price growth in Africa’s most populous nation slowed to 12.5 percent from a year earlier compared with 13.3 percent in March, the Abuja-based National Bureau of Statistics said in an emailed report on Tuesday. That’s the lowest rate since March 2016.

The rate is even further below the benchmark interest rate of 14 percent, where policy makers have kept it since July 2016 to fight price growth and support an economy that contracted in 2016. Central bank Governor Godwin Emefiele signaled rate cuts when inflation comes closer to the upper end of the target range of 6 percent to 9 percent. The Monetary Policy Committee is scheduled to review rates next week.

Election Spending

The central bank could still err on the side of caution as future inflation pressures may come from higher food costs in the wake of worsening insecurity that has disrupted production and supply. Price pressures could increase through higher state spending on this year’s budget, which has yet to be approved, and before elections due to take place in February.

Prices rose 0.8 percent in the month, the same as in March.

The MPC “may still want to give it some time, particular as we are getting to the pre-election period,” Olalekan Olabode, head of research at Vetiva Capital Management Ltd. in Lagos, said by phone. “If we do not see a consistent reduction in month-on-month inflation, then we wouldn’t want a situation where the CBN is giving mixed signals -- cutting rates now and needing to increase again later in the year if inflation picks up again.” 

About 30 percent of proposed expenditure is investment in roads, rail, ports and power to help boost economic growth, which the International Monetary Fund forecast at 2.1 percent this year. Expansion was less than 1 percent last year.

--With assistance from Simbarashe Gumbo Renee Bonorchis and Pauline Bax

To contact the reporters on this story: David Malingha Doya in Abuja at dmalingha@bloomberg.net, Solape Renner in Lagos at srenner4@bloomberg.net.

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Ana Monteiro

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