Nigeria’s inflation rate fell to 23.2% in February, down from 24.5% in January. Food inflation also decreased, while core price growth slightly increased. This reduction may lead the Central Bank of Nigeria to pause interest rate hikes at their upcoming meeting, with forecasts suggesting rates could drop below 20% by late 2025.
Nigeria’s annual inflation rate has experienced a notable decrease for the second consecutive month, creating a sense of optimism regarding price stabilizations. According to the National Bureau of Statistics, consumer prices increased by 23.2% in February, down from 24.5% in January. Food inflation also lessened, sliding from 26.1% to 23.5%, while core price growth witnessed a slight acceleration to 23% from 22.6%.
The cooling inflation may influence the Central Bank of Nigeria’s decision regarding interest rates during their upcoming meeting. Following a pause in rate hikes last month, the benchmark interest rate remains at 27.5%, after a series of increases aimed at managing inflation and stabilizing the naira.
Yvonne Mhango, Bloomberg’s Africa economist, forecasts that as energy prices normalize, annual headline inflation could further decline. She anticipates a reduction of the consumer price index below 20% by the end of 2025, suggesting that policymakers may begin easing rates in the latter half of that year.
The National Bureau of Statistics implemented significant revisions to the consumer price index for the first time in 16 years. The reference year has been adjusted to 2024, aligning the index more closely with current inflationary pressures. Additionally, the weight of food and non-alcoholic beverages has been significantly decreased to 40% from 51.8%. Month-on-month inflation stood at 2% for February, according to the agency’s report.
In summary, Nigeria’s inflation has declined for two straight months, providing grounds for optimism regarding a tapering of price pressures. This trend may influence the Central Bank of Nigeria to maintain interest rates at 27.5%. Future forecasts suggest continued moderation of inflation rates, with potential easing of monetary policy anticipated in late 2025. The recent overhaul of the consumer price index aims to better reflect the economic realities faced by households in Nigeria.
Original Source: financialpost.com
