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Surging price of Diesel may frustrate CBN plans to curb inflation with rate hike

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The Central Bank of Nigeria’s (CBN) plan to rein in inflation that’s a at five-and-a-half-year high may prove to be even more difficult after diesel prices tripled in June and show little signs of relenting.

Average diesel prices increased 203 per cent from a year earlier in June to N733.8 a litre, according to data published by the National Bureau of Statistics (NBS) on Wednesday.

That’s the highest level since at least June 2016, its data shows. Diesel prices have risen further to N780 a litre this month.

The statistic office does a monthly survey of fuel prices that are deregulated and used to calculate inflation data.

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The high prices are likely to stoke inflation that the central bank’s Monetary Policy Committee (MPC) said Tuesday it is focused on quelling as it raised its benchmark interest by 100 basis points to 14 per cent.

CBN Governor Godwin Emefiele said high levels of price growth has “negative consequences, particularly on the purchasing power of the poor, as well as retarding growth.”

Diesel prices have surged since Russia invaded Ukraine in February. Nigerian businesses and most of its population rely on fuel because of a shortage of power.

Poor maintenance and insufficient investment in the transmission network have resulted in only about a third of the country’s installed capacity being dispatched by the grid daily — a fraction of what’s needed in a nation of more than 200 million people.

~Bloomberg

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