Nigeria’s 275 basis points rate hike last month, to a record 12 per cent, was its central bank’s sixth attempt this year to rein in inflation. And, if figures released Tuesday by the Nigerian bureau of statistics are right, it has failed.
Inflation increased again in October to 10.5 per cent, from 10.3 per cent in September, which means that the central bank, whose target is single-digit inflation, is likely to hike once again when it meets on November 22.
Another factor in favour of a hike is the naira’s performance. Nigeria’s currency fell to record lows against the dollar last month, reaching N166.6 per dollar on October 10 before recovering a bit after the bank tightened.
However, the naira is falling again, trading on Tuesday at around N159 per dollar. That could be enough to force the bank to hike again or intervene in currency markets. Lamido Sanusi, central bank governor, said in Kuala Lumpur on Tuesday that N155 to N156 per dollar would be an “equilibrium” level for Africa’s top oil producer, agencies reported.
Nigeria’s economy, meanwhile, has reacted to the tightening, slowing down from 7.72 per cent year on year growth in the second quarter to 7.4 per cent growth in the third – another rate hike would presumably continue that.
The Nigerian government has promised to unveil its 2012 budget this month. It is expected to increase spending while also cutting subsidies on petrol, both of which would stoke more inflation. Yet another pointer towards more hikes in the future.
Related reading:
Nigeria: walking a ratings tightrope, beyondbrics
Nigeria: a microwave boom, beyondbrics
Nigerian banks: time to buy?, beyondbrics
Stefan Wagstyl
Josh Noble
Rob Minto
Pan Kwan Yuk
Jonathan Wheatley
Heba Saleh