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‘Oil price plunge may accelerate inflation in Nigeria’

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‘Oil price plunge may accelerate inflation in Nigeria’

Already contending with the possible risk of price rises due to an increase in spending ahead of February’s presidential election, Nigeria may face higher inflationary pressures due to the recent drop in the price of crude oil, analysts have said.

According to Bloomberg, experts believe that the higher inflation risks could push Africa’s central banks to tighten monetary policy.

“The oil plunge could accelerate inflation in Africa’s largest crude producer as it hits foreign-exchange  revenue  and adds to pressure on the naira. Higher spending ahead of February’s presidential election already poses price risks,” the news agency stated.

It reported Samantha Singh, an analyst Absa Group Ltd, as saying that until the crude price-plunge, “for most African countries it seemed that policy would be tighter for longer, but if oil prices continue to fall, given that it is  such a large part of most countries’ imports profile, inflation would follow and the bias could eventually shift.”

 

She added that but for producers, “the drop in oil prices could cause foreign-exchange supply challenges, which could be inflationary.”

The news agency pointed out that inflation has been above the Nigeria’s monetary authorities’ target for more than three years, noting that three of 10 Monetary Policy Committee (MPC) members voted for higher rates in September, with Central Bank of Nigeria (CBN) Governor , Mr. Godwin Emefiele saying an increase is “likely soon.”

According to Yvonne Mhango, the sub-Saharan Africa head of research at Renaissance Capital, one thing that could persuade the CBN to hold off on tighter policy for now is economic growth that’s still fragile after a 2016 contraction.

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