Market News

By Ruth Olurounbi

(Bloomberg) -- Nigerian inflation quickened more than expected in October, putting another interest-rate hike in play.

Consumer prices rose 33.9% year-on-year compared with 32.7% in September, the National Bureau of Statistics said in a statement on its website on Friday. That exceeded the median estimate of seven economists in a Bloomberg survey of 33.4%.

“The Central Bank of Nigeria now appears to have little choice but continue its hiking cycle,” said David Omojomolo, Africa economist at Capital Economics. Monetary policymakers have hiked rates at 13 straight meetings to 27.25% from 11.5% in May 2022. 

“We now expect the monetary policy committee to choose to hike rates by 100 basis points” on Nov. 26, with Governor Olayemi Cardoso “likely to have been spooked by the reversal in the disinflation process,” Omojomolo said.

Cardoso has repeatedly said the central bank remains resolute in its effort to rein in price pressures and achieve a positive inflation-adjusted interest rate to attract investment into the economy, which would help support the naira. The spread between the inflation rate and policy benchmark is now about 660 basis points. 

What Bloomberg Economics Says...

“Nigeria’s annual inflation rose more than expected in October but we expect the increase to be temporary. Price gains will likely slow over the rest of 2024, even if just moderately. This means the Central Bank of Nigeria won’t be deterred from hiking rates until real rates turn positive. Policymakers will stay the course and hike rates by 150-200 basis points over this quarter and the next.”

— Yvonne Mhango, Africa economist. Click here to read more.

The Nigerian currency has depreciated 45% this year, making it the world’s third-worst performer after the Lebanese pound and the Ethiopian birr.

Currency weakness and higher corn, rice and gasoline prices contributed to the acceleration. Food inflation quickened to 39.2% in October from 37.8% a month prior and core price growth, which excludes agricultural produces and energy, accelerated to 28.4% from 27.4%. 

“We do see disinflation eventually resuming from early next year, as the effects of the petrol price hikes and the naira’s devaluation fade. But a monetary easing cycle is unlikely to begin anytime soon,” Omojomolo said.

--With assistance from Simbarashe Gumbo.

(Updates with comments from paragraph three and chart.)