Inflation is slowing among top African economies but not in Nigeria

Inflation – the general rise in prices of goods and services over time – has begun to wane in leading African economies but Nigeria’s consumer prices remain elevated.

The latest data from the National Bureau of Statistics (NBS) shows that the headline inflation in Africa’s biggest economy surged to 34.19 percent in June up from 33.95 percent in May 2024.

But in South Africa, the top economy in the continent according to the International Monetary Fund, inflation is cooling as prices of food and transport subsides, hitting a two-month low after a steady rise since September 2023.

Statistics South Africa data showed headline consumer inflation eased to 5.1 percent year-on-year in June from 5.2 percent in May and core inflation softened, clearing the path for South Africa Reserve Bank (SARB) to cut rates at its next meeting in September.

Monetary policy in South Africa has remained tight as the central bank tries to bring inflation back towards the midpoint of its 3 percent to 6 percent target range.

Egypt, which also devalued its pounds and removed some subsidies like Nigeria, has begun to see its annual urban inflation rate slowed for a fourth consecutive month.

In June, the North African country’s inflation fell to 27.5 percent from 28.1 percent in May, data from the country’s statistics agency showed.

June’s slope extended the downward shift from a record 38 percent in September 2023 as the Central Bank of Egypt shifted to an inflation targeting model and a flexible exchange rate.

Egypt’s core inflation, which strips out volatile items such as fuel and some types of food, eased to 26.6 percent year-on-year from 27.1 percent in May, central bank data showed.

Even in Ghana prices have begun to cool as inflation slowed for a third consecutive month to 22.8 percent year-on-year in June from 23.1 percent in May, 2024, the Accra-based statistics agency said.

The decline in consumer prices in the cocoa, gold, and oil-producing West African country was driven by a fall in non-food inflation which dropped to 21.6 percent, enough to mute an increase in food inflation.

“What drives inflation in these countries differs. But basically, any country that wants to tame inflation must crash food, energy and transport prices as they are the main drivers of inflation,” said a leading financial expert.

Soaring inflation means the Central Bank of Nigeria (CBN) may continue to tighten monetary policy to steer the consumer price index to the projected 21 percent.

In its last monetary policy committee meeting on Tuesday, the CBN raised interest rates for the fourth consecutive time by 50 basis points to 26.75 percent to tame the three decade high inflation.

“The trajectory for inflation is uncertain despite the base effect. Fuel prices, food production, FX and sentiment will continue to drive price levels,” said Samuel Sule, chief executive officer of Renaissance Capital Africa.

Analysts are however betting that inflation will begin to moderate by July given the bumper harvest expectations and the removal of food importation tariffs.