IBADAN, Nigeria (VOICE OF NAIJA)- Nigeria’s inflation rate hit a fresh 17-year high in August, placing renewed pressure on the central bank to increase interest rates.
Annual inflation quickened to 20.5% in Africa’s biggest economy, compared with 19.6% in July, according to data released by the National Bureau of Statistics on its website on Thursday.
That’s the highest level since September 2005 and is more than double the 9% ceiling that the central bank targets. It matched the median estimate of six economists in a Bloomberg survey.
“Based on our Lagos market survey and econometric model, there is an indication that headline inflation will increase by 0.76 percent to 20.4 percent,” analysts at Financial Derivatives Company Limited (FDC) said in their latest economic bulletin.
They said this price growth would be the seventh month-on-month consecutive increase this year.
FDC said the projected increase in Nigeria’s inflation rate from 19.60 in July to 20.4 percent in August was fuelled by several factors but significantly by exchange rate pressure and price of diesel.
Cordros Capital, a financial services firm, also predicted that the headline inflation would be 20.52 percent in August.
“We expect the headline inflation to settle at 1.76 percent month-on-month in August, translating to an 87bps increase in the year-on-year inflation rate to 20.52 percent,” the company said in a recent weekly economic and market report.
Cordros Capital said its predictions were hinged on the lingering rise in transport costs, high gas and diesel prices, persistent currency pressures and the unfavourable base effects from the last year’s corresponding period.
The acceleration in inflation and a dollar shortage may see the Central Bank of Nigeria’s monetary policy committee lift its key interest rate for a third successive meeting on Sept. 27. Governor Godwin Emefiele said at the bank’s July meeting that policy makers will further tighten if inflation continues to accelerate at an aggressive rate.
“Inflation remains a serious concern, and so far, rate rises have not slowed down growth,” Joachim MacEbong, lead analyst at Lagos-based Acorn and Sage Consulting, said ahead of the release. “The CBN may feel there is still some scope to raise rates in order to attract foreign exchange inflows, giving the fact that the US is unlikely to stop raising rates.”
The biggest drivers of inflation were the prices of bread, cereals, gas and liquid fuel products. Annual food-price growth soared to 23.1% from 22% in July and core inflation, which strips out food costs, quickened to 17.2% in August, compared with 16.3 % in the previous month. Prices rose 1.77% from a month earlier.