Nigeria’s Inflation Slows as Effect of Subsidy Cut Falls Away

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Nigeria’s inflation rate fell to 9 percent in January as the effect of a year-earlier reduction in fuel subsidies dropped out of the calculation.

Inflation in Africa’s largest oil producer slowed from 12 percent in December, the Abuja-based National Bureau of Statistics said today in an e-mailed report. The median estimate of seven economists surveyed by Bloomberg was 9.5 percent. Prices rose 0.6 percent in the month.

The January 2012 increase in gasoline prices after President Goodluck Jonathan cut subsidies helped keep inflation above the central bank’s target of less than 10 percent throughout last year. Central bank Governor Lamido Sanusi said last month that the rate may drop close to the target, largely because of “base effects.”

The reduction in the gasoline subsidy in January last year “led to increases in transportation costs as well as secondary effects, as the transportation costs affected both food and non- food prices,” the statistics bureau said in the report. Shocks to prices last year “imply that the year-on-year changes exhibited this year will be muted.”

The central bank kept its policy rate unchanged at a record-high 12 percent for an eighth consecutive meeting on Jan. 21 after raising it by 575 basis points in 2011 to curb price pressures and support the naira. The bank will hold off on lowering borrowing costs while it monitors government spending and until policy makers see that “lowering rates will not in any way undermine the tremendous achievements we’ve had,” Sanusi said on Jan. 25.

Food Prices

Core inflation, which excludes agricultural products, rose 11.3 percent in January from a year earlier, compared with 13.7 percent in the previous month, the statistics bureau said.

Inflation has been above 10 percent since August 2011. It peaked last year at 12.9 percent in April and June, staying below the central bank’s forecast of as much as 15 percent after the subsidy cut.

Food prices, which account for more than half of the consumer price index, rose 10.1 percent in January from a year earlier, down from 10.2 percent in the previous month, the second consecutive easing, the statistics bureau said.