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Nigeria annual inflation dips for second time in May, counters weak naira

06/15/2021 | 10:23am EDT
People shop at Cherries Hypermarket on the eve of Christmas during the coronavirus disease (COVID-19) outbreak in Abuja

ABUJA (Reuters) -Nigeria's annual inflation fell for the second straight month in May to 17.93%, the statistics office said on Tuesday, countering the impact of rising food prices and a recent currency devaluation.

It fell to 18.12% in April after prices peaked at a more than four-year high of 18.17% the previous month. Analysts, however, say a weaker naira currency could yet stoke a further rise in prices. The central bank targets an inflation band of 6% to 9%.

The Nigerian naira is quoted at a more than 3-1/2 year low of 500 per dollar on the black market, a level it reached after the country devalued its official exchange rate to 410 naira.

The government has said inflation was a structural problem linked to infrastructural deficits and not solely a money supply issue, citing that most of it was also imported.

The National Bureau of Statistics (NBS) said on Tuesday core inflation -- the price index less farm produce -- rose 41 basis points in May to 13.15%.

"The highest increases were recorded in prices of pharmaceutical products, garments, shoes, ... motor cars, hospital services, fuels," the NBS said.

On Tuesday, the World Bank said inflation in Nigeria, especially in food prices, was exacerbating poverty and food insecurity. Food accounted for almost 70% of Nigeria's total increase in inflation over the past year.

Food prices, the major component of inflation, has been rising in the past heaping pressure on households who are already faced with a shrinking labour market and stagnant growth at a time of mounting insecurity.

The NBS said its food index declined 44 basis points from the previous month to 22.28% in May.

Growth in Nigeria resumed in the fourth quarter after a COVID-19 induced recession but it lags the rest of sub-Saharan Africa, with food inflation, heightened insecurity and stalled reforms slowing the economy and increasing poverty.

(Reporting by Chijioke Ohuocha; Editing by Catherine Evans and Jonathan Oatis)

By Chijioke Ohuocha

ę Reuters 2021
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