Nigeria’s headline inflation hit 34.2% y/y in June 2024

Nigeria's headline inflation rate rose to 34.2% year-on-year in June 2024, according to data released by the National Bureau of Statistics. The increase of 24 basis points has raised concerns about the country's economic stability and the impact on the cost of living for its citizens. In a recent interview on CNBC Africa, Femi Oladehin, Partner at Argentil Capital Partners, provided insights into Nigeria's inflation trajectory and the expected moves from the upcoming Monetary Policy Committee Meeting. Oladehin highlighted that the current inflation pressures, including core and food inflation, were not surprising, attributing them to the base effects of the fuel price increase anniversary. He emphasized that the interventions by the Central Bank of Nigeria were yet to have a significant long-term impact, and the key drivers of inflation remained unchanged, particularly citing cost-push inflation and food inflation as persistent challenges. Looking ahead to the Monetary Policy Committee Meeting scheduled for the upcoming week, Oladehin expressed concerns about the delicate balance the committee needs to strike amid stubborn inflation figures, exchange rate pressures, and slowing growth rates. He mentioned the possibility of a symbolic interest rate hike to signal market direction but acknowledged the complexities faced by the policymakers. One of the major contributors to inflation in Nigeria is food inflation, which recorded a rate of 40.87% year-on-year. Oladehin discussed the government's response to this issue, including a two trillion stabilization plan with a significant allocation to the agriculture sector, import waivers, and tariff adjustments on essential food items. While acknowledging these measures as positive steps, he stressed the need for more holistic and sustainable solutions to address the underlying causes of high food prices. The conversation then moved to the implications of the Central Bank of Nigeria's stance on interest rates in the fixed income market. Oladehin noted a deceleration in rates but highlighted the central bank's ongoing hawkish stance due to the persistent inflationary pressures. He recognized the challenges of managing high interest rates in the economy but suggested that it might be a necessary strategy to combat the stubborn inflation. In conclusion, Oladehin painted a challenging economic environment for Nigeria, with a delicate balance required in policymaking to address inflation, exchange rate stability, and economic growth. He likened the situation to a patient with multiple ailments, highlighting the need for a balanced approach to tackling the various economic challenges. Despite the complexities and lack of quick fixes, he emphasized the importance of survival and the government's efforts to navigate through these turbulent times towards a more stable economic future.