Inflation Slows to 10.3 Percent, Fuel Strike Cost Economy U.S.$1.2 Billion

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Inflation Slows

Inflation Slows

Contrary to expectations that inflation rate would rise in December 2011, the National Bureau for Statistics (NBS) said the tempo slowed to 10.3 per cent from 10.5 per cent in November.

This is as the bureau gave a completely conflicting figure on the amount the economy lost to strike at N207.4 billion. Sanusi Lamido Sanusi, Central Bank of Nigeria (CBN) governor had said the economy lost about N600 billion, while Ngozi Okonjo-Iweala, finance minister and co-ordinating minister said about N500 billion was lost instead. Independent analysts had put the figure at N720 billion.

Analysts said December’s inflation figure was broadly in line with expectations, but warned that they expected January’s figure to be affected by the hike in fuel prices.

“The market will now be anxiously awaiting the Jan 2012 inflation data given the recent 50 per cent increase in fuel prices,” said Standard Bank’s Samir Gadio.

“We see inflation rising by up to 200 bps this year, with highs of 14 percent to 14.5 per cent year-on-year (y/y) in July to August.”

But he added that this would most likely spur monetary tightening, which could make the bond market more attractive.

“For now, we would recommend a carry trade at the short end of the curve (the 364-day T-bill yield has fluctuated around 20 per cent lately,” Gadio said.

Nigeria’s economy lost out on an estimated N207.4 billion ($1.27 billion) due to an eight-day strike this month prompted by a dispute over fuel import subsidies, the NBS said on Wednesday.

The biggest losses were sustained in the retail and the oil and gas sectors, a report by the bureau said.

Consumer inflation edged down slightly year-on-year in December to 10.3 per cent, from 10.5 per cent the month before, it also said. Food inflation rose 11 per cent in December, up from 9.6 per cent in November, the bureau’s data showed.

Nigerian trade unions called off strikes and protests on Monday, ending a major confrontation over fuel prices after President Goodluck Jonathan said he would cut them by one third.

But a week of total shutdown was massively damaging to Nigeria’s economy, especially in its two biggest cities of Lagos and Kano, where protests were most widespread.

“The sector, which accounts for about 18 per cent of GDP worst hit by the crisis was the wholesale and retail sector, which recorded a loss of approximately N86.98 billion naira,” the bureau report said.


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