Rising food and fuel prices created significant inflation in the country in 2022, causing the Naira, Nigeria’s currency, to lose 10.2 percent of its value.
According to the World Bank’s latest Africa’s Pulse report for April 2023.
The Washington-based bank noted that Nigeria’s monetary policy tightening, which saw rates rise by 650 basis points, has not resulted in lower inflation.
It stated that monetary policy’s reduced effectiveness can be attributed, among other things, to persistent supply shocks driving inflation (such as commodity prices and climatic shocks), a lack of central bank autonomy, foreign exchange distortions that widened the gap between the official and parallel exchange rates, and fiscal dominance.
The report said two-digit inflation rates are expected in 25% of Sub-Saharan African countries in 2023.
As per National Bureau of Statistics data, headline inflation in Nigeria rose to 21.91 percent in February (NBS).
According to the bank, Nigeria is suffering from both high inflation and high budget deficits.
The bank said it expects 25 percent of countries in the Sub-Saharan African region to suffer from two-digit inflation rates in 2023.
In February, headline inflation in Nigeria rose to 21.91 percent according to data from the National Bureau of Statistics (NBS).
Nigeria is suffering from both high inflation and high budget deficits, according to the bank.
“About half of the Sub-Saharan African countries face both high inflation (low monetary policy space) and wider fiscal deficits (low fiscal policy space).
“Notable cases include Ghana, Nigeria, Malawi, Zambia, and Burundi, among others”, it stated.
Further, the report explained that the worst-performing currency in the Sub-Saharan African region in 2022 was the Ghanaian cedi, which lost 40 percent of its value in the year.
It stated that the currency has already lost 20 percent of its value so far in 2023.
“Other currencies with significant losses last year include those of Sudan (23.6 percent), Malawi (20.7 percent), The Gambia (14.6 percent), and Nigeria (10.2 percent).
“Rising food and fuel prices, as well as the depreciation of the exchange
rate, were the main drivers of inflationary pressures in the region—and, particularly, in countries like Ghana, Sudan, and Malawi”, the bank said.
