Hike rates

Soaring inflation increases pressure on Nigeria to hike rates again

Nigeria’s inflation rate hit its highest level in five years in June, raising the likelihood of the central bank raising interest rates again next week.

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(Bloomberg) – Nigeria’s inflation rate hit a five-year high in June, raising the likelihood that the central bank will raise interest rates again next week.

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Consumer prices rose 18.6% from a year earlier, compared with 17.7% in May, the National Bureau of Statistics announced on its website on Friday. Inflation, which has been above the 9% ceiling of the central bank’s target range for seven years, exceeded the median estimate of 18.5% by 11 economists in a Bloomberg survey. Prices rose 1.8% from the previous month, the same rate as in May.

Nigeria’s monetary policy committee will announce its latest decision on interest rates on July 19. At its last meeting in May, the central bank raised the cost of borrowing for the first time in nearly six years.

MPC member Festus Adenikinju said at the time that the committee’s 150 basis point hike was unlikely to curb inflation and that policymakers should be “too aggressive” to rein in price growth . Governor Godwin Emefiele said at the same meeting that a sharp rise in inflation is detrimental to economic growth and must be contained.

The main drivers of inflation were the prices of gasoline, bread and grain products. Annual food price growth accelerated to 20.6% from 19.5% in May and core inflation, which excludes the cost of food and energy, reached 15.7% in June , compared to 14.8% the previous month.

Read: Consumer prices in Nigeria in June: by category (table)

Ongoing gasoline shortages and soaring diesel costs, combined with erratic power supply, election spending and continued currency weakness will likely put upward pressure on prices over the coming months.