Nigerian inflation accelerated for the 13th consecutive month in November, even as the central bank left its main lending rate at a record-high to balance price pressures with supporting a slumping economy.
The inflation rate in West Africa’s biggest economy climbed to 18.5 percent from 18.3 percent in October, the Abuja-based National Bureau of Statistics said in an e-mailed statement on Thursday. Prices increased 0.78 percent in the month. The median estimate of 10 economists surveyed by Bloomberg was for inflation to accelerate to 18.6 percent, a level last hit 11 years ago.
Inflation quickened on higher import costs, after lower prices and output of oil, Nigeria’s main export, led to foreign currency shortages. Dollar scarcity that persisted even after the Central Bank of Nigeria removed a currency peg in June and the naira lost 40 percent its value to the U.S. dollar contributed to the economy contracting for the first nine months of this year. The International Monetary Fund expects it to shrink by 1.7 percent for all of 2016.
Food inflation increased by 17.2 percent, while the average price of gasoline climbed to 146.7 naira compared with 145.9 naira in October, according to the statistics agency’s data. The index’s rise was mainly driven by increases in the prices of imported foods, meat, bread and cereals and fish, according to the report.
The weak supply of basic food items such as rice also helped drive up prices, according to Ayodele Akinwunmi, head of research at Lagos-based FSDH Merchant Bank Ltd.
“The foreign exchange rate is also very weak,” Akinwunmi said by phone on Thursday. “People are sourcing the more expensive dollars from the black market to import items.”
The central bank continues to bar imports of 41 items it deems non-essential from sourcing foreign currency from the official market, forcing them to buy dollars from the black market. While the naira gained 0.16 percent to 315.75 against the dollar by 9:53 a.m. in Lagos, it’s trading at 485 on the black market.
Mindful of the slumping economy, the central bank left its benchmark lending rate at 14 percent last month to fight inflation.
“With the CBN’s tight monetary stance, if there are no further structural shocks, inflation is likely to peak at a rate slightly above 20 percent in March 2017,” Abuja-based Time Economics Ltd. said in an e-mailed note before the data was released. “The inflation in the economy is largely due to structural factors.”
An interest-rate reduction wasn’t justifiable under the current inflation scenario and a weak foreign exchange rate, Akinwunmi said.
President Muhammadu Buhari on Wednesday asked lawmakers to approve a 20 percent increase in spending plan to 7.3 trillion naira ($23 billion) for 2017, to help the economy recover. Budget and National Planning Minister Udo Udoma said Wednesday that the government reduced its 2017 economic growth forecast by half a percentage point to 2.5 percent.