Nigerian Headline Inflation Up October As Third Quarter GDP Tumbles

According to data recently released by the National Bureau of Statistics, inflation for the month of October accelerated to 10.5%, reflecting an increase of 0.19% from the month of September. Real GDP also fell on the back of lower oil production in the third quarter.

The report attributed the increase in inflation to rise in prices of house hold items, building materials, diesel, kerosene and electricity tariffs.

According to an emailed note from Yvonne Mhango of Renaissance Capital, “Inflation edged up as we expected, to 10.5% YoY in October, from 10.3% YoY in September.  This increase, albeit modest, is likely to compel the monetary policy committee (MPC) to sustain its tightening cycle when it meets next week. However, we are likely to see a relatively more modest hike than we’ve seen in recent weeks.”

Real GDP growth has also experienced a decline from the last quarter, the GDP growth for 2Q, 2011 was recorded at 7.72% by the National Bureau of Statistics, and dropped thirty-two basis points to 7.4% over the 3Q, 2011.

The slowdown in real GDP is attributed to the drop in oil production in the 3Q, where production slowed down by an average of 130,000 barrels per day.

Analysts expect inflation to continue accelerating as the governments prepares to release its 2012 budget. According to David Keohane of the Financial Times, “The Nigerian government has promised to unveil its 2012 budget this month. It is expected to increase spending while also cutting subsidies on petrol, both of which would stoke more inflation. Yet another pointer towards more hikes in the future.”