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Nigerian inflation was little changed in September as food prices continued to rise, limiting scope for the central bank to ease policy before the end of the year.
The inflation rate in Africa’s most-populous nation decreased to 15.98 percent from 16.01 percent in August, the Abuja-based National Bureau of Statistics said in an emailed report on Tuesday. That median of 13 economists’ estimates compiled by Bloomberg was 16 percent. Prices rose 0.8 percent in the month.
While inflation slowed for the eighth consecutive month, 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. A drop last year in the output and price of oil, Nigeria’s biggest export, caused a dollar shortage and led to a weaker naira and increased import prices. This contributed to the economy contracting for five straight quarters before expanding 0.6 percent in the three months through June.
While the inflation rate has decreased, it’s “still high for central bank to loosen policy,” Ayodele Akinwunmi, head of research at Lagos-based FSDH Merchant Bank Ltd. Said by phone from Lagos. “That will probably happen next year as inflation further decelerates.”
Dollar supply has improved since the central bank started easing currency-trade controls, and introduced a window where portfolio investors and importers can buy foreign currency at market-determined rates. Floods in Benue state last month have kept food prices high, negating some of the benefits of the increased availability of foreign exchange.
Food prices rose 20.32 percent from a year earlier, compared with 20.25 percent in August, driven by the costs of potatoes, meat and oils and fats, the statistics office said.
“A spike in food price inflation, due to poor harvest in some parts of the country, offset the declining inflationary effect of the currency weakness,” the World Bank said last week.
The International Monetary Fund projects Nigeria’s economy to grow by 0.8 percent this year, and 1.9 percent next year from a contraction of 1.6 percent in 2016 and sees inflation staying above target through 2018.
The “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,” Akinwunmi said.
