INTERVIEW-Nigeria inflation likely to hit 10 pct-c.banker

Tue Mar 26, 2013 1:24pm GMT

Related Topics

* Nigeria inflation may top 10 pct in new few months

* Inflation to return below double digits in Q4

* Nigeria FX reserves at $48 bln, can exceed $50 bln

By Carolyn Cohn

LONDON, March 26 (Reuters) - Nigeria's inflation is likely to exceed 10 percent at some point over the next few months, but will return to single digits by the fourth quarter, Nigeria's deputy central bank governor said on Tuesday.

Nigeria's central bank held rates at 12 percent last week for the ninth time in a row, citing concerns over ongoing external price pressures.

"It's the beginning of the planting season, at that time you have this slight uptick in prices," Sarah Alade told Reuters in an interview on the sidelines of an investor non-deal roadshow for AMCON, Nigeria's state-backed bad bank.

"By the time it's harvest time, prices are dampened. You have from 9 to 9.5, now to 10 and then back again - in and out. By the fourth quarter, we should be back to single digits."

Analysts say Africa's second biggest economy has achieved an impressive degree of macroeconomic stability over the past year, with inflation falling, the local naira currency stabalising and stock and bond markets both performing well.

But investors remain wary of the government's tendency to fritter away its oil windfall on recurrent spending, stoking price pressures. Corruption also drains assets.

Nigerian consumer inflation rose to 9.5 percent in February, from 9 percent in January, although still within the central bank's single digit target. Food price inflation rose to 11 percent.

Central bank governor Lamido Sanusi told Reuters on Monday that he expected interest rates to remain unchanged at 12 percent in the coming months to avoid jeopardising recent progress towards taming inflation and stabilising the exchange rate.

Sanusi said he wanted to see a sustained downward trend in inflation before easing.

Alade said the central bank had retained a "tight monetary stance" at the latest meeting, though she said she was relaxed about the naira, which fell to a seven-month low last week.

"It's not a concern. If (a currency) is market-driven, you have this kind of up and down. We are quite okay with that."

Alade told investors at the roadshow that the central bank's foreign exchange reserves, which hit their highest in over four years at $47 billion in February, had continued to grow.

"We have robust external reserves, as of Friday reserves were $48 billion," she said.

Reserves would likely remain on an upward path, surpassing the $50 billion level, Alade told Reuters.

"We are nearing $50 billion, I still see the reserves increasing, if oil prices remain where they are - we have all this fiscal consolidation."

Nigeria's central bank has been accumulating reserves and the federal government has also built up its oil savings over the last year, although two withdrawals of $1 billion each since from the Excess Crude Account in January have raised fears of a U-turn on hard-won fiscal discipline. (Editing by Tim Cocks, Ron Askew)

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