Nigeria bucks the inflation trend... for now

Inflation has edged up in most countries in Africa in recent months, but Nigeria has bucked the trend. Here, inflation dropped to its slowest pace since April 2008 last month. This has been due in part to falling food inflation, as well as the more gradual improvements on the supply side of the economy as a result of structural reforms that have been implemented in the past few years. Nevertheless, the big falls in the CPI rate now look to have taken place, and a combination of naira weakness and loose fiscal policy could push inflation up in the coming months. As such, the Central Bank of Nigeria opted to keep rates unchanged in September. Elsewhere, rates were also left on hold in South Africa and Kenya this month and, though we expect a gradual shift towards policy tightening in the region, monetary policy is set to remain a little dull in the near-term, with interest rates likely to stay unchanged in Africa’s three major economies over the next 6-12 months.