Macroeconomic updateWest Africa

19 July 2022

West Africa’s June Inflation : No Retreat From Sweltering Inflation

In brief

  • From the global economy, down to domestic economies, there is a nagging sentiment that something is just off – or it is about to be – making it difficult to feel good about anything, including the economy.
  • Of course, the elephant in the room is inflation, which is unacceptably high and for most consumers, just incredibly annoying. The explosion of prices for everyday necessities has come as a shock to many.
  • But every inflation is transient until the inflation boogeyman appears, and no country knows this better than Nigeria which is experiencing its longest double-digit inflation episode since 1995.
  • Ghana has also been pushed to the brink by giddy double-digit inflation that has intensified since the onset of the Russia-Ukraine crisis – a development that has sparked tension and frustration across the country.
  • Unfortunately, inflation has broadened beyond food and energy prices and now poses a clear and present danger.
  • For many African states, the return of inflation is not just an important economic event, but also a political one as it becomes decreasingly plausible that it will simply fade painlessly away.
  • The human and economic impact of the war in Ukraine has worsened with commodity price shocks that have increased the cost of living for millions of West Africa’s people, as prices are now rising at record rates.
  • If price stability is “the bedrock of the economy”, in the words of the United States (US) Federal Reserve Bank (Fed) chair Jerome Powell, then tough decisions will have to be made by policymakers to tamp it down.