Nigerian inflation accelerated for the ninth consecutive month in July, adding to pressure on the Central Bank of Nigeria to continue raising interest rates even as the economy deteriorates.
According to the National Bureau of Statistics, inflation rate increased to 17.1 percent from 16.5 percent in June, the highest since October 2005. The economy contracted for a second consecutive quarter in the three months ended June from a year earlier after shrinking 0.4 percent in the previous period.
Output in Africa’s most populous nation is weighed down by low oil production and prices, as well as a shortage of foreign currency after the central bank held a naira peg for more than a year.
The Central Bank of Nigeria maintained restrictions that block importers of selected items from steel products to rice from accessing the foreign currency inter-bank market even after removing a naira peg on June 20. Fuel shortages also pushed up consumer prices, adding to inflation pressure caused by the more than one-third loss in the value of the naira since it was allowed to float.
“Inflation will continue to accelerate, reaching about 20 percent later this year,” John Ashbourne, a London-based economist at Capital Economic Ltd., said before the data was released. “One of the big factors right now is the devaluation of the naira.”
Food inflation accelerated to 15.8 percent from 15.3 percent. The cost of gasoline declined to 148 naira from 149 naira in June, the statistics agency said in a separate statement.
The apex raised its benchmark interest rate by 200 basis points to 14 percent last month to fight inflation and prop up the currency by luring foreign investors. Governor Godwin Emefiele will announce the bank’s next policy move on Sept. 20. The economy will probably contract 1.8 percent this year, according to the International Monetary Fund.
With inflation accelerating “we expect at least another 100 basis points hike this year,” Raza Agha, an economist in London at VTB Capital, said by e-mail before the data was released.