- Title: NIGERIA: Nigeria's cinsumer inflation falls for third straight month
- Date: 22nd October 2012
- Summary: LAGOS, NIGERIA (FILE) (REUTERS) VARIOUS OF TRADER SORTING GRAIN VARIOUS OF RICE ON DISPLAY AT MARKET STALL VARIOUS OF TRADERS SELLING PIGS FEET
- Embargoed: 6th November 2012 12:00
- Location: Nigeria
- Country: Nigeria
- Topics: Economy,Politics
- Reuters ID: LVAELA6EZCUJMNP9K8DZWKOMCE4P
- Story Text: Nigeria's consumer inflation fell for the third straight month in September, mainly due to a drop in the underlying "core" price growth that is closely watched by the central bank.
Headline inflation eased to 11.3 percent year-on-year in September, down from 11.7 percent year-on-year in August and a 2012 peak of 12.9 percent in June, official statistics showed on Wednesday (October 17).
Food inflation, the largest contributor to the headline index, rose slightly to 10.2 percent year-on-year in September, from 9.9 percent in August, National Bureau of Statistics (NBS) numbers showed.
Bismarck Rewane, an independent economic analyst based in Lagos says a tight monetary policy and the appreciation of the naira is partly behind the drop in inflation.
He sees food prices remaining low in coming months if nothing else changes.
"We've noticed a little spike in the urban index, the FDC (Financial Derivatives Company) index, inflation index, shows a point 2 percent increase in prices in the urban areas, how long this is going to last or stay is another issue but long term trends seem to show that productivity will increase and pricing pressure will actually begin to reduce," he said.
Nigeria's central bank kept its base interest rate on hold at 12 percent last month for the sixth time in a row, citing the high rate of core inflation as one of the reasons for keeping monetary policy tight.
However, the central bank has for months prioritised supporting the volatile naira currency and building up foreign exchange reserves, running a relatively tighter monetary policy as a result.
Bismarck added that more investors are likely to take up new business opportunities if the trend continues.
"Inflation is rarely the biggest problem, first and foremost, nobody invests in a country if there's inflation because the value of the naira is much more lower than that which you invest so in an inflational environment, there's actually net withdrawal and leakages of money but in a non-inflational environment, there's stability of policy and stability of value so there's increased trade flows and increased investment flows so it's good for the economy, it's good for the economy as a destination for investment and it's also good for productivity and others," said Rewane.
The central bank 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 items like food, dropped to 13.1 percent year-on-year in September from 14.7 percent the previous month.
"Sometime next year, there will be money supply pressure when the AMCON (Asset Management Corporation of Nigeria) bonds begin to mature and they have to be re-financed and paid off, that will decrease money supply significantly and begin to bring pressure on the consumer price index; on the other hand, because of improved electricity and power supply, we are going to see increased productivity in the manufacturing sector and that will help to stabilise prices," said Rewane.
Although Africa's top oil producer has had one of the fastest growing economies in the world, poor fiscal management, corruption and poor infrastructure has wasted some of these gains.
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