Inflation in Nigeria, Africa’s most populous nation, slowed for the sixth month in a row in August as increases in food costs eased and banks crimped lending.
The inflation rate dropped to 11 percent from 11.1 percent the month before, the Abuja-based National Bureau of Statistics said yesterday on its Web site. The cost of food rose an annual 12.7 percent, compared with 12.9 percent in July.
A good harvest in sub-Saharan Africa’s second-largest economy after South Africa has helped to slow the increase in food costs. The increase in production prompted the governor of the Central Bank of Nigeria, Lamido Sanusi, to forecast on Aug. 28 that the inflation rate will fall to 9 percent by the end of the year.
“We’ve not had problems with food prices” which form a large proportion of the inflation basket, Rose Umoren, President of Global Money Ltd., a business research company based in the Nigerian capital, Abuja, said before today’s announcement.
The credit squeeze in the country of more than 140 million people also helped to slow inflation, said Bismarck Rewane, chief executive officer of Financial Derivatives Ltd., a Lagos- based fund manager. The “ability to spend has been squeezed out,” he said in a telephone interview.
Banks in Nigeria may have as much as $10 billion of toxic assets, Eurasia Group, a New York-based research company, said in May. The bad debt is partly the result of at least 1 trillion naira ($6.5 billion) of loans backed by equities, according to Bank of America Corp.
The benchmark stock index declined 46 percent last year and 33 percent this year, the biggest drop of 89 stock markets tracked by Bloomberg worldwide.
Sanusi bailed out five banks and sacked their chief executive officers last month after an audit found they had excessive non-performing loans and were dependent on the central bank for funding.
The central bank left its benchmark interest rate unchanged at 6 percent on Sept. 1 after it pumped 420 billion naira ($2.72 billion) into the banking system, helping to slash interbank rates to 5 percent. The rates have since climbed back to more than 10 percent, the local unit of Citibank Inc. said yesterday in a note.