Nigerian Inflation Declines, Central Bank May Pause Rate Hikes

Nigeria experienced a reduction in annual inflation for February to 23.2%, down from 24.5% in January. This decline raises the possibility that the Central Bank of Nigeria may pause interest rate hikes. The statistics agency also revised the consumer price index to better reflect current economic conditions.

Nigerian inflation has declined for the second consecutive month, marking a significant shift in price pressure trends. The National Bureau of Statistics reported an annual rise of 23.2% in consumer prices for February, down from 24.5% in January. Additionally, food inflation decreased to 23.5% from 26.1%, while core price growth increased slightly to 23% from 22.6%.

The decline in inflation may influence the Central Bank of Nigeria’s upcoming monetary policy decisions, potentially leading to a pause in interest rate hikes during the May meeting. After a series of increases aimed at mitigating inflation and stabilizing the naira, the bank currently maintains a benchmark interest rate of 27.5%.

According to Bloomberg Economics, the ongoing cooling of annual headline inflation could lead to further depreciation of prices, with an expectation that the consumer price index might fall below 20% by the end of 2025. Yvonne Mhango, an economist at Bloomberg Africa, predicts that policymakers could initiate easing measures in the latter half of 2025.

In anticipation of better representing economic conditions, the statistics agency revamped the consumer price index for the first time in 16 years, adjusting the reference year to 2024 and significantly lowering the weighting of food and non-alcoholic beverages to 40% from 51.8%. February’s month-on-month inflation registered at 2%.

In summary, Nigeria’s inflation rates have shown a promising decrease for the second month, suggesting that price pressures may have peaked. This trend could lead the Central Bank of Nigeria to maintain its interest rates during the next policy meeting. Furthermore, projections from economists indicate a continued moderation in inflation, anticipating a decline below 20% by 2025, along with recent adjustments to the consumer price index to better reflect household inflation experiences.

Original Source: financialpost.com