With inflation nearing 30% and its currency hitting an all-time low, Nigeria is facing one of its worst economic crises in years.
The latest data from the National Bureau of Statistics on Thursday showed that the headline consumer price index rose to 29.9% year-on-year in January, its highest level since 1996.
The Nigerian naira hit a new all-time low against the U.S. dollar on both the official and parallel foreign exchange markets on Monday, sliding to almost 1,600 against the greenback on the official market from around 900 at the start of the year. The country is Africa's largest economy and has a population of more than 210 million people, but relies heavily on imports to meet the needs of its rapidly growing population.
The surging cost of living and economic hardship prompted protests across the country over the weekend. The plummeting currency has added to the negative impact of government reforms such as the removal of gas subsidies, which tripled gas prices. "Robust import demand could force the Central Bank of Nigeria to reimpose import bans and FX restrictions to lessen the burden on the balance of payments. This could exacerbate domestic product shortages and increase inflation further."
"We expect a combined 200 bps in rate hikes at the next two MPC meetings, scheduled for end-February and end-March this year; however, we think that more hikes are needed to stem rising inflation," Scribante added.
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