Nigeria’s Inflation Sticky in September as Food Costs Rise

Nigeria’s Annual inflation slowed in September, decreasing to 15.98 percent from 16.01 percent in August, as food price pressure continued into September and all major food sub-indexes increased.

According to the National Bureau of Statistics (NBS), the rate of annual inflation was 0.03 percent percentage points lower than the rate in August, while a separate food price index showed inflation at 20.32 percent in September, up from 20.25 percent in August.

The NBS said in a report that “the rise in the index was caused by increases in prices of potatoes, yams and other tubers, milk cheese and eggs, bread and cereals, coffee tea and cocoa, soft drinks, fish, meat and oil and fats.”

Despite the improvement in dollar supply since the central bank started easing currency-trade controls, with the introduction of a window where portfolio investors and importers can buy foreign currency at market-determined rates, floods in Benue state last month kept food prices high, negating some of the benefits of the increased availability of foreign exchange.

Median of 13 economists’ estimates compiled by Bloomberg revealed that inflation rate was 16 percent and prices rose 0.8 percent in the month.

Africa’s largest economy emerged from its first recession in 25 years in the second quarter as oil revenues rose; nonetheless the pace of growth was slow, signifying a fragile recovery. The level of inflation in September as food prices continued to rise, has limited the scope for the central bank to ease policy before the end of the year. It has been outside the central bank’s target range of 6 percent to 9 percent for more than two years even as policy makers raised the key lending rate to a record high of 14 percent.

Central Bank Governor, Godwin Emefiele, said “the bank’s monetary policy committee noted that high food inflation in the last few months could be traced to rising prices of farm inputs and supply shortages” and added that “the committee also cited the impact of intermittent clashes between farming communities and mostly nomadic herdsmen, as well as weak harvest due to increased flooding of farmlands, as having had affected food prices”.  The level of inflation in September as food prices continued to rise, has limited the scope for the central bank to ease policy before the end of the year.

However, “Central bank will continue to use open-market operations, and work with the debt management office to adjust Treasury-bill yields so as to encourage banks to increase lending to the private sector and support growth,” Ayodele Akinwunmi, head of research at Lagos-based FSDH Merchant Bank Ltd said.

Nigeria’s economy to grow by 1 percent in 2017 – 0.2 percentage points below its forecast in April stated World Bank, while the International Monetary Fund expect Nigeria’s economy to grow by 0.8 percent this year, 1.9 percent next year from contraction of 1.6 percent in 2016. a The IMF sees inflation staying above target through 2018.