Nigeria’s April inflation to edge down to 21.6%: Capital Economics

Data due to be published on Monday will show that Nigeria’s headline inflation rate edged down to 21.6 percent year-on-year in April, analysts at Capital Economics have projected. 

The London-based economic research firm, however, said inflation pressures would remain elevated on the back of the looming petrol subsidy removal. 

“Inflation surprised to the upside in March, hitting a fresh 17-year high of 22.0 percent y/y,” the analysts said. “The rise in inflation was broad-based but there was a particularly notable rise in core inflation, from 18.8 percent y/y in February to 19.9 percent y/y in March.”

Lingering disruptions caused by cash shortages following botched demonetisation efforts were probably partly to blame, they said.

“Those disruptions are likely to have eased somewhat in April after the government extended the deadline to exchange old notes for new ones until the end of this year,” the firm said.

It said the naira has also been relatively stable against the dollar on both the official and parallel markets in recent weeks. “All told, we think that inflation fell to 21.6 percent y/y last month.”

The new government, led by President-elect Bola Tinubu, will take office on May 29.

“While campaign promises were less market-friendly than other candidates, there is likely to be some effort to cut fuel subsidies as well as introduce exchange rate reforms (that result in a weaker naira),” Capital Economics said, adding that these would keep inflation pressures elevated.

“While we think that the tightening cycle has ended, the central bank is likely to remain in a hawkish mood over the coming months,” it added.