Nigeria Pauses Interest Rate Hikes as Revised Inflation Data Shows Deceleration
Key Points:
* Nigeria's central bank maintains its key policy rate at 27.5%.
* Inflation has slowed to 24.5% in January, significantly lower than the previously reported 34.8%.
* Data overhaul and methodology revisions contributed to the reduced inflation figures.
* The central bank acknowledges ongoing inflationary pressures, particularly in food prices.
Nigeria's Central Bank Holds Policy Rate
The Central Bank of Nigeria (CBN) has decided to maintain its policy rate at 27.5%, ending a period of aggressive monetary tightening. Governor Olayemi Cardoso cited recent macroeconomic improvements, including the stabilization of the naira, in support of the decision.
Revised Inflation Data
Following a revamp of the data calculation methodology, the Nigerian Bureau of Statistics (NBS) has released revised inflation figures. According to the new method, annual inflation in January stood at 24.5%, down from 34.8% in December using the old method.
NBS Overhauls Consumer Price Index
The NBS has overhauled the Consumer Price Index (CPI) for the first time in 16 years, updating the reference year to 2024. Additionally, the weighting of categories such as food and non-alcoholic beverages has been adjusted, and the number of items in the inflation basket has increased to 934.
Central Bank Cautious Despite Progress
Governor Cardoso welcomed the revised inflation data but cautioned that the central bank remains vigilant about price movements. "Members were not oblivious to the risk of persisting inflationary pressures driven largely by food prices," he said.
Conclusion
The CBN's decision to pause its monetary tightening campaign signals a shift in strategy as inflation continues to decelerate. However, the central bank remains cautious and will continue to monitor economic conditions closely to ensure sustained price stability.