17 Feb 2022: Nigerian inflation marginally declined to 15.6% this month from 15.63% as compared to last month, thereby leaving room for the central bank to keep interest rates on hold.

Even though the inflation has wildly exceeded the top of the central bank’s target band of 6% to 9%, but it has done so for almost seven years now. Therefore, it is quite unlikely that the monetary policy committee will increase the key interest rate when it meets next month. Since last year, Governor Godwin Emefiele has reiterated time and again that the central bank will only make policy adjustments once it is absolutely clear that the economy’s recovery is on a sustainable path. 

The top African crude producer’s rebound from its worst shrinkage in almost three decades in 2020 is being hindered by persistent production troubles in its oil industry, making it very hard to fill its quotas under a pact with the OPEC+ alliance. While oil contributes less than 8% to Nigeria’s gross domestic product, it accounts for almost all the foreign-exchange earnings and half of government revenue.

A survey of 12 economists conducted by Bloomberg in November projected the pace of economic growth decelerated to 1.4% in the final quarter of last year, from 4% in the prior three-month period.

The International Monetary Fund said earlier this month that “with the recovery yet to be broad-based, the projected decline in inflation, limited fiscal policy space, and contained financial sector risks, supportive monetary policy is appropriate unless exchange rate pressures intensify, or inflationary pressures resurface.” 

Food price growth also slowed to 17.1% in January, from 17.4% the previous month, and core inflation was little changed at 13.87% from 13.9% in December. Prices climbed 1.5% in the month.

Long fuel queues, since February, has led to a steep increase in transport fares that is likely to put upward pressure on prices in March. Africa’s largest economy, which imports all of its refined fuel, this month withdrew some supplies of gasoline from the market because they were unsuitable for domestic consumption stating and elevated methanol content, causing shortages.