Annual inflation in Nigeria slowed to 11.14 percent in July, its lowest level in more than two years, the National Bureau of Statistics said on Wednesday, but it remained above the central bank’s single-digit target.
Inflation has declined in Nigeria since February last year, but the rate of decline has slowed compared with earlier this year. The central bank governor has warned that it may start to rise later this year as spending increases before a presidential election in February 2019.
Nigeria emerged from its first recession in 25 years in 2017 as higher oil prices and recent debt sales helped the country accrue billions of dollars in foreign reserves. Growth remains fragile, though.
The central bank is now looking for ways to boost credit while keeping a lid on inflation.
The price index, which fell from 11.23 percent in June, was still above the central bank’s target of single-digit inflation. It had said it would consider cutting the main interest rate from the record high of 14 percent, which it has maintained for two years, if the target was met.
A separate food price index showed inflation at 12.85 percent in July, compared with 12.98 percent in June. Food inflation has been in double digits for almost three years, but has slowed for more than six months.
The statistics office said the rise in the food index was caused by increases in prices of potatoes, yam and other tubers, vegetables, bread and cereals plus fish and fruits.
“We see inflation edging up moderately in August and September, before slipping below 11 percent in Q4. However, there is upside risk to this view from the expansionary … budget, pre-election spending, potential wage increases and security challenges,” Yvonne Mhango, economist at Renaissance Capital, wrote in a note.
The central bank kept its main interest rate at 14 percent at its last monetary policy committee meeting in July to counter inflationary risk that could arise as a result of the influx of cash from Nigeria’s much-delayed 2018 budget.
