Nigeria’s annual inflation rate jumped 0.72% to 16.47% in January from the previous month, marking a 17th monthly increase as the effects of the COVID-19 pandemic weighed on the index.
Africa’s most populous country is facing its worst economic recession in 37 years, triggered by a COVID-19 pandemic-induced crash in global crude oil prices that has affected state revenue collection. As a result the currency – Naira – has weakened and the government is facing a huge budget deficit.
The National Bureau of Statistics said that inflation in Nigeria, which has been in double digits since 2016, worsened with the pandemic. Food prices increased by 1.01% from December to 20.57% in January.
“This rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetables, fish and fats,” it said in a report.
The International Monetary Fund (IMF) this month urged Nigeria to phase out the central bank’s financing of the government deficit to reduce inflation.
The Washington-based fund said it expects inflation to remain in double digits in the absence of monetary policy reforms, suggesting an interest hike may be needed if inflation worsens after the central bank cut rates twice last year to try to stimulate the economy.
Nigerian officials told the IMF that inflation could hit the 16% mark by the end of the year due to fuel and electricity price hikes, but that the farm harvest of late 2020 is expected to ease pressure on food prices.
“We think that inflation is probably close to a peak but it will probably take until the second half of the year before the headline rate drops back markedly,” said Virag Forizs, Emerging Markets Economist at Capital Economics.
“Currency weakness and foreign exchange restrictions will continue to put upward pressure on inflation of imported goods.”