Nigeria’s inflation quickens in October ahead of central bank rate decision

Inflation in Nigeria rose for the ninth straight month to 21.09% in October from 20.77% in September, the statistics bureau said on Tuesday, a week before central bank interest rate decision.

High inflation, weak economic growth and mounting insecurity are major issues for voters as Nigeria heads for national and presidential elections in February, in which incumbent President Muhammadu Buhari will not take part in due to term limits.

The National Bureau of Statistics (NBS) attributed the rise in price levels in October to food supply disruptions, import cost hikes due to currency depreciation and a rise in production costs.

Policymakers in Africa’s biggest economy maintain that persistent inflationary pressures are structural and largely imported. Analysts say inflation is driven by dollar scarcity, high diesel costs and excess liquidity.

Central Bank Governor Godwin Emefiele switched in May from loose monetary policy to support weak economic growth to a tight policy after inflation hit its highest level since 2005.

Few analysts expect the central bank to hold the key rate at the current level of 15.50% next Tuesday. The bank has raised rates by a total of 400 basis points so far this year.

“We expect the headline rate to keep rising into the early months of 2023,” Virag Forizs, emerging markets economist at Capital Economics, said.

Forizs said the October inflation data comes before the impact of recent flooding in Nigeria and further currency weakness, meaning prices could rise further. She added the central bank could hike rates next week by 100 basis points.

A separate food price index showed inflation at 23.72% in October, compared with 23.34% in September, as Africa’s most populous country continues to face higher prices for staples like rice and bread.

The central bank has also announced plans to mop liquidity from mid-December to tighten money markets. Nigeria’s government expects inflation to remain in double digits, averaging 17.16% next year.

WATCH: Nigeria’s central bank hiked its main lending rate to 15.5%, its highest level yet and more than forecast, forging ahead with efforts to rein in inflation and ease pressure on its currency https://t.co/cjELxb4BHM pic.twitter.com/EaKmdjX9LE

— Reuters Business (@ReutersBiz) September 28, 2022