Nigerian official headline inflation is likely to be released on Monday January 17. All indications point to the fact that there will be another decline. Our econometric model shows that headline inflation will drop from 15.4% to (14.9%-15.1%) in December. This will be the 9th consecutive monthly decline, confounding analysts and economists alike. The surprise is mainly because slowing inflation in Nigeria at a time that global inflation is accelerating is an unusual phenomenon. In advanced economies, the trend has been most noticeable in the US, which reported a surge in inflation to 7% (a 41-year high).
The question therefore arises, that how is it possible for inflation to be declining in Nigeria when it is rising in most of its trading partners? And also when the naira is plummeting in the forex market.
Will the MPC change its monetary policy stance?
Most Central banks are now beginning their tightening cycle. The Bank of England raised its policy rate by 15bps to 0.25%pa in December 2021 (first time in three years). The US Fed also plans to increase interest rates three times in 2022. Whilst it is likely that the Nigerian MPC will maintain status quo at its meeting later this month, the market will read it as a contrarian move.
In the download, the FDC Think Tank shares its estimates for December inflation and likely policy reactions.
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