Nigeria inflation 16.5%

19/07/2016 05:33 AST

Nigerian inflation accelerated to the highest rate in almost 11 years in June, complicating the task of the central bank in an economy which is at risk of contracting this year.

The inflation rate in Africa’s largest economy increased to 16.5 per cent from 15.6 in May, the Abuja-based National Bureau of Statistics said in an e-mailed statement on Monday.

That’s the highest rate since October 2005, according to data on the Central Bank of Nigeria’s website. Prices rose 1.7 per cent in the month. The median of seven economist estimates compiled by Bloomberg was for inflation to quicken to 16.2 per cent.

Nigeria imports at least 70 per cent of its refined fuel, despite pumping 1.6 million barrels of crude a day in June according to the International Energy Agency, and faced fuel shortages as retailers struggled to get foreign currency to buy product during a 15-month naira peg that was removed last month.

The currency’s official exchange rate weakened to more than 280 per dollar, compared with the fixed rate of 197-199, and the naira trades at around 360 on the black market, increasing prices for consumers.

“Inflation will continue rising because the driving factors are still there, but there should be a slowdown in the subsequent months,” Babajide Solanke, an analyst at Lagos-based FSDH Merchant Bank Ltd., said by phone.”Inflation may not necessarily cause monetary policymakers to increase rates, because that will hurt growth.

They may choose to use other monetary instruments to tighten liquidity.” The naira weakened 2.3 per cent to 291 per dollar by 3:54 p.m in Lagos.

The official exchange rate needs to move closer to that on the black market in order to boost investor confidence, Olusegun Sotola, head of research at Lagos-based Initiative for Public Policy Analysis, said by phone.

That would bring money into Nigeria and reduce the effect of inflation, he said. The average price for a liter (0.26 gallon) of gasoline was 148.5 naira ($0.52) in June, 1 per cent less than in May, according to a separate report from the statistics bureau. The June gasoline price was 32 per cent higher than a year earlier.

The Gulf Today