Nigerian inflation accelerated to the highest rate in almost 11 years in June, adding pressure on policymakers to increase borrowing costs.
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 emailed 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 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.
“We see inflation averaging in the mid 20 per cent by year-end, mainly because of the foreign-exchange rates,” Yvonne Mhango, an economist at Renaissance Capital Ltd. said by phone from Johannesburg before the data was released.
Food prices rose 15.3 per cent in June from a year earlier, compared with 14.9 per cent in May. The highest increases were in the costs of fish and meat, fruit and vegetables and bread and cereals, the statistics office said.
The International Monetary Fund said this month Nigeria’s economy could contract for the first time in more than two decades this year as a fall in oil revenue and electricity shortages weigh on output. Gross domestic product contracted by 0.4 per cent in the three months through March as the naira peg and restrictions on trading foreign currency led to a shortage of dollars needed to import fuel and materials for manufacturers.
The Central Bank of Nigeria, which kept its benchmark rate at 12 per cent in May, will announce its next policy decision on July 26.