Macroeconomic updateNigeriaStrategy

20 May 2022

Nigeria’s April Inflation: Still torrid

In brief

  • Nigeria’s April inflation reading is at an eight-month high, compounded by global factors such as the global commodities price rally, supply chain dislocation, and the shift in global monetary policy.
  • In comparison to urban centres, rural settlements are worse hit by the impact of prevailing global factors on commodity prices, underscoring the inefficacy of the country’s poorly-targeted subsidy regime that is constituting a drain on its financial resources.
  • The persistence and breadth of inflation pose downside risks for not just the Nigerian economy, but also the financial market, as global de-risking plays a spoilsport across markets amid stagflation fears.
  • The latest inflation data is not just about food and energy price increases, but also about the outcomes of Nigeria’s unorthodox monetary policy.
  • With recent experiences from Turkey to draw from, the prospects of a pervasive inflationary pressure ahead would further undermine market confidence in the naira. This would spark speculative demand for foreign currencies as monetary policy settings are too loose to combat inflation risks.
  • Certainly, the monetary policy committee will be left in a bind at next week’s meeting following the recent political shake-up, which does not rub off well on the bank’s key currency – i.e. credibility.


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