Nigeria’s inflation breached CBN’s target band for seventh year

Nigeria’s inflation rate surged to a five-year high in June, increasing the likelihood that the central bank will raise interest rates again next week.

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

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

Nigeria’s inflation rate jumped to the highest level since January 2017

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MPC member Festus Adenikinju said at the time that the committee’s 150-basis-point hike was unlikely to rein in inflation and policy makers should be “overly aggressive” in reining in price growth. Governor Godwin Emefiele said at the same meeting that a steep acceleration in inflation is detrimental to economic growth and needs to be contained.

The biggest drivers of inflation were the prices of gas, bread and cereal products. Annual food-price growth accelerated to 20.6% from 19.5% in May and core inflation, which strips out the cost of food and energy, quickened to 15.7% in June, compared with 14.8% in the prior month.

Persistent gasoline shortages and surging diesel costs, combined with erratic power supply, election spending and continued currency weakness are likely to place upward pressure on prices in coming months.