The nation’s consumer inflation eased marginally in July, statistics showed on Friday, surprising many analysts who had expected it to rise due to the effects of fuel subsidy removal in January and base effects.
The consumer price index (CPI) fell to 12.8 per cent year-on-year in the month down from 12.9 per cent in June, the National Bureau of Statistics (NBS) said in a report on Friday. The CPI increased 0.24 per cent month-on-month.
“A look at the monthly changes over the previous three months reveals that although the CPI has generally risen, its increase has been at a slower rate, which suggests that prices may be easing across the economy,” the NBS said.
The Central Bank of Nigeria (CBN) had anticipated that the consumer inflation would rise to around 14 per cent by the end of the first half of this year due to the upward effects on prices from the partial removal of fuel subsidies in January.
Interest rates have been on hold at 12 per cent since October last year but the bank tightened money supply at its meeting last month to help support the weakening naira currency.
The impact on inflation from the subsidy removal has been more muted than expected, so far, with consumer inflation averaging around 12.5 per cent this year, after averaging around 10 per cent in the second-half of last year.
“The implication (from July figure) is that this year’s inflation has peaked at much less elevated levels than anticipated a few months ago and will probably decelerate to around 10 per cent by year end,” Standard Bank economist Samir Gadio said.
“This development has the potential to trigger another rally in the bond market in the near future,” Gadio added.
The CBN has said repeatedly it is committed to supporting the Naira with disciplined monetary policy and lower than expected inflation figures alone are unlikely to be enough to encourage a rate cut in the near-term.
Core inflation, which excludes volatile food produce and is closely watched by the bank, was 15 per cent year-on-year in July, down from 15.2 per cent the previous month but still far above the regulator’s preferred single-digit range.
“We do not believe that we will see a move to ease monetary policy, even following this inflation print. Inflation remains in double digits for now, leaving little room for complacency,” said Razia Khan, Head of Africa Research at Standard Chartered.