Nigeria's rebased January inflation drops to 24.48%

Nigeria's rebased headline inflation fell to 24.48 per cent year-on-year in January this year, marking a significant decline from the previous rate of 34.8 per cent. The latest data released by the National Bureau of Statistics reveals that urban inflation stood at 26.09 per cent, while rural inflation came in at 22.15 per cent. To provide further insights into these figures and their potential impact on monetary policy decisions, Bankole Odusanya, Chief Dealer at Polaris Bank, shared his expert analysis in a recent interview on CNBC Africa. Odusanya highlighted key considerations for both fiscal and monetary authorities in interpreting and responding to the inflation data. Odusanya expressed that the drop in inflation to 24.48 per cent was somewhat anticipated, considering previous discussions suggesting a decrease. While the decrease was not as sharp as some had speculated, it still signifies a positive shift towards lower inflation rates. He noted that the National Bureau of Statistics attributed the decline to the updated base year closer to the current period, 2024-2025. Odusanya emphasized the importance of viewing the data objectively, without allowing sentiments to cloud interpretations. In terms of fiscal policy implications, Odusanya pointed out that the inflation data provides a more realistic reflection of consumer spending habits. The inclusion of energy pricing and the impact of deregulated petrol prices on transport costs were highlighted as contributing factors to the inflation dynamics. Additionally, the data indicated changes in consumption patterns, with increased spending on transport, restaurants, eateries, and the hospitality sector. Odusanya suggested that the data could assist fiscal authorities in assessing GDP rebasing, consumption trends, and potential export opportunities. Regarding monetary policy, Odusanya discussed the Central Bank of Nigeria's (CBN) inflation target of 15 per cent set for the year. With current inflation levels at around 24 per cent, he acknowledged that achieving the 15 per cent target may be challenging but not entirely out of reach. Odusanya speculated that the CBN may exercise caution in adjusting interest rates in response to the latest inflation figures. He anticipated that the Monetary Policy Committee (MPC) might delay any rate decisions until May to evaluate a more comprehensive data set, including February, March, and April. Looking ahead, market sentiments suggest that the CBN is likely to proceed prudently with monetary policy adjustments, with a potential emphasis on maintaining the status quo. However, there remains a degree of uncertainty, as traders may need to consider scenarios where unexpected rate cuts could occur. The upcoming policy committee meeting in May is expected to provide further clarity on the CBN's actions in response to the evolving inflation landscape.