Nigeria's inflation figures dropped for the third consecutive month in November to 12.8 per cent.
According to data from the National Bureau of Statistics, released on Tuesday, this is significantly lower than 13.4 percent recorded in October and 13.6 per cent in September. This is coming on the back of suggestions by the International Monetary Fund (IMF) that emerging markets will need to guard against rising inflation, surging capital inflows and the associated risk of bubbles in asset and credit markets and the threat of rapid currency appreciation.
According to the Bretton Woods institution, "In coming years, emerging market economies will face challenges very different from those of the advanced economies."
Food prices rise
The statistics office, in its report for November, stated that average monthly food prices rose marginally by 0.3 percent in November 2010 when compared with October. "The level of the Composite Food Index was higher than the corresponding level a year ago by 14.4 percent, meaning that the average price of foodstuff has risen by that margin in the last one year."
It however observed a near price stability with some non food items. The highest food price increase were recorded in Delta and Ebonyi States at 118.6 per cent and 118.3 per cent in that order, while the least increase were recorded in Ekiti and Benue with 108.8 per cent.
Regional Head of Research, Africa, Standard Chartered, Razia Khan, suggested a tightening of monetary policy to ensure continued foreign exchange rate as well as price stability. The naira currently trades for N149.06 to the dollar. "Foreign exchange reserves may remain under pressure, and offsetting policy will be required from the authorities to ensure price stability," she said in her assessment of the N4.2 trillion 2011 budget presented yesterday by President Goodluck Jonathan.
IMF statistics
According to the IMF, emerging economies having ridden out the negative impact of the global financial crisis better than the developed economies should be less concerned about weak growth and deflation.
According to the latest edition of Finance & Development Magazine, an IMF publication, there was variation among regions, however. "Emerging Asia saw the most favourable outcomes, with modest declines in growth. The emerging economies of the Middle East and North Africa (MENA) and those in sub-Saharan Africa also enjoyed only small declines in output, possibly due to their modest exposure to trade and financial flows from the advanced economies."
Nigeria is the second largest economy in sub Saharan Africa after South Africa.The report hinged the success of these countries on a combination of factors, including macroeconomic policies that brought inflation under control and limited public debt; reduced dependence on foreign financing; current account surpluses that insured against reversals of capital inflows; and diversification in production and exports. "Improved trade and financial linkages increased resilience, and rising incomes and a burgeoning middle class translated into growing domestic markets for emerging market economies," the report said.
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