Nigeria: Inflation peaks in four years as food prices soar | News on the coronavirus pandemic

Inflation in Nigeria has reached 17.33% due to the COVID pandemic, lower oil revenues and a weakened currency.

Nigeria’s inflation hit a four-year high in February as food prices jumped more than 20%, putting financial pressure on households already facing a shrinking labor market and stagnant economy. a moment of growing insecurity.

Double-digit inflation since 2016 has reached 17.33%, driven by the impact of a coronavirus epidemic which has also led to a drop in the price of oil, Nigeria’s main export, and weakened the naira currency.

Tuesday’s inflation reading was the highest since the 17.78% hit in February 2017. The economy was in crisis then and is on the brink of recession now, having increased just 0.11% in the fourth quarter. trimester.

Food prices, which make up the bulk of the inflation basket, rose 21.79 percent in February, a jump of 1.22 percentage points in January, the National Bureau of Statistics (NBS) said. .

In a country plagued by insecurity following a wave of kidnappings of schoolchildren in its increasingly lawless north, there are fears that the combination of “stagflation” of rising unemployment and prices and weak growth could triggers major social unrest.

“Household stress will be compounded by increasing reports of insecurity in some areas, fueling the risk of wider social discontent,” said Jacques Nel, head of macroeconomic research at NKC African Economics in South Africa .

Commodities including bread, grains, potatoes, fruits and oil have contributed to the rise in the food price index, the NBS said in its report.

Inflationary pressures are likely to remain high in the coming months, Nel predicted, adding that only 30.6 million Nigerians out of a population of around 210 million were considered fully employed.

Person receives dose of Oxford / AstraZeneca coronavirus vaccine at National Hospital in Abuja, Nigeria [File: Afolabi Sotunde/Reuters]

Bismarck Rewane, managing director of Lagos-based Financial Derivatives, said the “stagflation crisis” would take a long time to resolve, with inflation swallowing up economic gains to the point where any government stimulus might be too weak to generate returns. jobs.

Monetary policy dilemma

President Muhammadu Buhari has placed investments in rail and road at the center of his administration’s efforts to revive growth, but declining government revenues linked to falling oil prices have dampened his ambitions.

Given the backdrop of weak growth and high inflation, few analysts expect the central bank to raise or lower its base rate by 11.5% next Tuesday, during a policy meeting.

“They should be thinking of a squeeze to encourage savings and investment that might help jobs but I think we may have hit the limit. [what can be achieved with changes to] monetary policy, ”Rewane said.

Meanwhile, the International Monetary Fund, which said in February that the bank might need to tighten its policy if inflation got out of hand, urged it to phase out government deficit financing to help control pressures on prices and allow the naira to float. more freely.

The central bank tried to manage the pressure on the currency by restricting access to dollars for certain imports to stimulate local production, and by instituting several exchange rates.

Such “subsidized credit” has clearly failed to prevent inflation from rising in the short term, said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.

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