Nigerian Inflation Eases Again, Potential for Rate Hold by Central Bank

Nigerian inflation has decreased for the second month in a row, with annual consumer prices rising 23.2%. The decline in food inflation and adjustments to the consumer price index signal potential stabilization. The Central Bank of Nigeria may pause interest rate changes in May, influenced by these trends. A Bloomberg economist predicts further reduction in inflation rates by 2025.

Nigerian inflation has shown signs of easing for the second consecutive month, paving the way for optimism regarding reduced price pressures. According to the National Bureau of Statistics, the annual consumer price increase dropped to 23.2% in February from 24.5% the previous month. Notably, food inflation decreased to 23.5% from 26.1%, while core inflation experienced a slight acceleration from 22.6% to 23%.

This cooling of inflation may influence the Central Bank of Nigeria (CBN) to maintain its interest rates during the upcoming May meeting. Last month, the CBN paused its tightening measures, keeping the benchmark interest rate steady at 27.5% after several hikes aimed at managing inflation and stabilizing the naira.

Yvonne Mhango, an economist at Bloomberg Africa, remarked on the trend: “Annual headline inflation in Nigeria cooled for a second consecutive month in February. We anticipate more of the same as energy prices moderate ahead – our call is for the consumer price index to slip below 20% by the end of 2025. Policymakers will probably start easing in the second half of 2025.” Additionally, the statistics agency recently updated the consumer price index, adjusting the reference year to 2024 for a more accurate reflection of current inflation trends. The weighting of food and non-alcoholic beverages was significantly reduced to 40% from 51.8%.

In summary, Nigeria’s recent inflation trends suggest a potential stabilization in the economy. The observed decline in annual inflation rates and the adjustments made to the consumer price index reflect ongoing efforts to manage price pressures. These developments may lead the Central Bank to consider maintaining interest rates, fostering a cautious optimism for continued economic stability in the near future.

Original Source: financialpost.com