Economy

CBN Expected to Halt Interest Rate Hikes— Report

Written by Agboola Oluwafemi on September 17, 2024

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Nigeria’s annual inflation rate dropped to a six-month low in August, providing the Central Bank of Nigeria a potential opportunity to pause its unprecedented tightening cycle during their upcoming meeting, according to Bloomberg.

Consumer prices increased by 32.2 percent, down from 33.4 percent in July, as reported by the National Bureau of Statistics in a statement published on its website on Monday. This figure aligned with the median estimate from a Bloomberg survey of nine economists.

The slowdown in inflation was driven by the easing effects of currency devaluation and the temporary removal of fuel subsidies, which had been implemented a year earlier. These measures were part of the reforms introduced by President Bola Tinubu after taking office in May 2023, aimed at attracting investors, floating the currency, and alleviating budget pressures.

Increased corn yields and a six-month duty-free window for importing corn and wheat also contributed to the moderation in price increases. The data was collected before mid-August, so the impact of a 45 percent hike in gasoline prices in early September, which led to higher transport costs, was not reflected.

The inflation slowdown opens the possibility for policymakers to pause the tightening cycle, which has raised the benchmark interest rate from 11.5 percent to 26.75 percent in just over two years. The monetary policy committee, which is set to announce its decision on September 24, will also have time to evaluate the effects of recent currency fluctuations, severe floods in northeastern Nigeria, and the gasoline price hike on inflation.

Food inflation eased to 37.5 percent in August, down from 39.5 percent in July. Meanwhile, core inflation, which excludes agricultural products and energy, edged up slightly to 27.6 percent from 27.5 percent.