Lower oil prices to delay rate hikes, but not in Nigeria

The dramatic fall in oil prices pushed inflation down in much of Sub-Saharan Africa at the end of last year, and it is likely to slow further this year. This would lead policymakers in some of the region’s major economies to postpone policy tightening. Interest rate hikes in the likes of South Africa and Kenya, which a few months ago central bankers suggested were just around the corner, now look likely to be delayed until at least the second half of the year. The major exception in the region is Nigeria, where lower oil prices have caused the naira to fall to a record low, which should soon feed through to a pick-up in inflation. At this month’s meeting, policymakers may have wanted to avoid rocking the boat ahead of February’s general election. But we suspect that interest rates will need to be raised again sooner rather than later.