Nigerian inflation accelerated for the 11th consecutive month in September as food prices rose, strengthening the case for the central bank to maintain a tight monetary stance even as the economy is contracting.
The inflation rate in Africa’s most populous country increased to 17.9 percent from 17.6 percent in August, the Abuja-based National Bureau of Statistics said in an e-mailed statement on Friday. Prices rose 0.8 percent from the previous month, compared with 1% from July to August. The median of 15 economist estimates compiled by Bloomberg was for an increase to 18 percent.
Inflation has been rising partly due to dollar shortages caused by a 197-199 naira peg to the U.S. currency, which increased import costs of products from fuel to rice and electronics. That, coupled with shortages of power as well as a drop in the price and production of crude oil, Nigeria’s biggest export and revenue-earner, weighed on output and consumption. Foreign-exchange shortages have persisted even after the peg was removed on June 20.
The September data “came in line with expectations,” and showed that month on month inflation was easing, Michael Famoroti, an economist at Lagos-based Vetiva Capital Management, said by phone on Friday. “It allows the monetary committee to continue its current monetary stance. That means maintaining a tight monetary stance which is not necessarily a continuation of tightening.”
On Sept. 20, Nigeria’s Monetary Policy Committee led by central bank Governor Godwin Emefiele rejected calls by Finance Minister Kemi Adeosun to lower interest rates, and instead kept them unchanged at the highest level in nine years, at 14 percent. Adeosun said lower rates would support an economy forecast by the International Monetary Fund to contract by 1.7 percent in 2016, the first full-year recession in 25 years.
Food inflation accelerated to 16.6 percent in September from 16.4 percent in August, as the cost of meat, bread, cereals and oil increased, the statistics agency said. The average price for a liter (0.26 gallon) of gasoline was 146.3 naira (0.52$), a drop from 147.3 naira in August.
“We see headline inflation at 18 percent year-on-year in December, and retreating to 10.3 percent one year later on positive base effects,” Gregory Kronsten and Chinwe Egwim, two analysts at Lagos-based FBN Quest, said in an e-mailed note before the data was released.