Nigeria’s annual inflation rate saw a significant decline to a six-month low in August, which may provide policymakers with an opportunity to pause their current cycle of rate hikes at their forthcoming meeting.
According to the latest data, consumer prices rose by 32.2% in August, down from 33.4% in July. This reduction aligns with the predictions made by economists.
The easing of inflation could prompt the central bank to reconsider its strategy of raising interest rates. This slowdown is attributed to several factors: the diminishing impact of currency devaluation, the temporary removal of fuel subsidies, and higher corn yields. These changes are part of a broader set of economic reforms introduced by President Bola Tinubu since he assumed office in May 2023. The reforms aim to attract investment, stabilize the currency, and relieve budgetary pressures. Furthermore, a six-month window allowing for duty-free imports of wheat and corn also helped alleviate price pressures.
The collected data does not reflect the effects of a 45% increase in gasoline prices that occurred in early September, which has since led to higher transportation costs. As a result, the central bank may use this period of reduced inflation to assess whether to maintain its current monetary policy stance or adjust it. The monetary policy committee will make its decision on September 24 and will take into account recent currency fluctuations, severe flooding in northeastern Nigeria, and the impact of rising gasoline prices on inflation.
Additionally, food inflation moderated to 37.5% in August from 39.5% in July. In contrast, core inflation, which excludes food and energy costs, experienced a slight increase, reaching 27.6% from 27.5%. This nuanced shift highlights the complex interplay of factors influencing Nigeria’s inflationary landscape and the broader economic environment.
