As widely expected, Nigeria’s headline inflation jumped by 0.49% to 13.71%, the highest level in thirty-one months. Food inflation is the major victim, spiking by 0.66% to 16.66%. This was driven largely by output constraints, higher energy costs (PMS price and cost reflective electricity tariffs) and forex restrictions for finished food and fertilizer imports.
Besides the upward inflationary trend, the faster pace of increase suggests that inflation is unlikely to start tapering in the near term. The CBN believes that an inflation rate above 12% is growth retarding. Nigeria is in stagflation, as the rise in inflation coincides with a major contraction in growth (-6.1%). This, in the midst of a health crisis will make the resolution more complicated. However, addressing these challenges is not a binary choice between growth and inflation, but can be salvaged with a cocktail of fiscal, monetary and trade measures.
In the publication, the FDC Think Tank shares its thoughts on the impact of September’s inflation numbers on the economy and MPC’s decision.
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