Inflation is expected to ease in several major African economies next year, however, it will remain stubbornly high in Nigeria due to the challenging terrain for the naira currency.
The acute shortage of dollars in many African countries, including Angola, Nigeria, and Zambia, has often strained domestic inflation. These economies are reliant on single-commodity currency inflows, such as crude oil and copper.
A recent Reuters poll of 15 analysts suggests that countries with more diversified sources of dollar revenues, like Kenya, are expected to experience a greater moderation in inflation.
However, in Nigeria, inflation is expected to accelerate to 29.1% this year from an average of 24.5% last year, before gradually slowing to 17.2% next year. Last month, it reached a 28-year high of 33.2% in annual terms.
Nigeria’s central bank governor, Olayemi Cardoso, implemented a 200 basis points increase in the monetary policy rate to 24.75% last month, following a 400 basis point hike in February.
Even with a more coherent monetary policy now in place, and potential naira stability, Nigerian inflation will only fall slowly this year, Citi wrote in a note to clients.
The high inflation rate reflects ongoing elevated food price inflation which accounts for around 50% of the CPI basket and is only marginally impacted by monetary policy, Citi added.
High food price inflation can be attributed to several factors, including flooding in various parts of the country in recent years, the increasing cost of fertilizer, and ongoing insecurity in many food-producing regions.
BUSINESS INSIDER
