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Nigeria’s MPC may hike benchmark rate on surging inflation

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Nigeria’s inflation rate surged to a five-year high in June, increasing the likelihood that the Central Bank of Nigeria (CBN) will raise interest rates again next week.

The country’s rate-setting Monetary Policy Committee (MPC) is expected to meet from Monday to Tuesday while the expectation is high that rising inflation may force members of the committee to hike interest rate at the end of the meeting on Tuesday.

Nigeria’s MPC will announce its latest interest-rate decision on July 19. At its last meeting in May, the central bank raised the cost of borrowing for the first time in almost six years.

Consumer prices rose 18.6 per cent from a year earlier, compared with 17.7 per cent in May, the National Bureau of Statistics said on its website on Friday.

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Inflation, which has been above the 9 per cent ceiling of the central bank’s target band for seven years, topped the median estimate of 18.5 per cent by 11 economists in a Bloomberg survey. Prices climbed 1.8 per cent from the previous month, the same rate as May.

MPC member Festus Adenikinju said at the time that the committee’s 150-basis-point hike was unlikely to rein in inflation and that policymakers should be “overly aggressive” in reining in price growth.

CBN Governor Godwin Emefiele said at the same meeting that a steep acceleration in inflation is detrimental to economic growth and needs to be contained.

The biggest drivers of inflation were the prices of gas, bread and cereal products. Annual food-price growth accelerated to 20.6 per cent from 19.5 per cent in May and core inflation, which strips out the cost of food and energy, quickened to 15.7 per cent in June, compared with 14.8 per cent in the prior month.

Persistent gasoline shortages and surging diesel costs, combined with erratic power supply, election spending and continued currency weakness are likely to place upward pressure on prices in the coming months.

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