Nigeria’s economy has been battered for a months in a row. Hence inflation has increased to its highest in almost 11 years.
At the present rate, the Central bank of Nigeria may not be able to withstand market forces as the economy will most like contract.
Nigeria’s rate of inflation increased to 16.5 percent from 15.6 in May.
These figures are from National Bureau of Statistics, Abuja.
According to Bloomberg, “That’s the highest rate since October 2005, according to data CBN’s website.
“Prices rose 1.7 percent in the month.
“The median of seven economist estimates compiled by Bloomberg was for inflation to quicken to 16.2 percent’” Bloomberg reported.
Nigeria imports more than 60% of refined petroleum products.
This is irrespective of the fact that we produce about 1.6 million barrels of crude a day.
The naira has also weakened. At the parallel market, the naira stood at 280 per dollar and trades for 360 on the black market.
A financial analyst with FSDH, Babajide Solanke stated that “Inflation will continue rising because the driving factors are still there.
“Thereafter, it may slowdown in the subsequent months.
“Inflation may not necessarily cause monetary policymakers to increase rates, because that will hurt growth.
“They may choose to use other monetary instruments to tighten liquidity,” Solanke said.
According to the International Monetary Fund, IMF, Nigeria’s economy may contract for the first time in 20 years.
This is directly linked to fall in revenues from oil and epileptic power supply, Bloomber says.
“Gross domestic product contracted by 0.4 percent in the three months through March.
This was as a result of the naira peg and restrictions on trading foreign currency which led to a shortage of dollars needed to import fuel and materials for manufacturers.
The Central Bank of Nigeria, which kept its benchmark rate at 12 percent in May, will announce its next policy decision on July 26.