April 29- The poll suggests inflation in Nigeria is expected to average 19.0% as Sub-Saharan Africa’s biggest economies will grow slower this year, crippled by chronic electricity supply problems in cash shortages in Nigeria, a Reuters poll found, while softer commodity prices will also weigh.
Dollar strength and critical shortages across the continent have made economic activity cumbersome and added tricky inflation dynamics in key countries like Nigeria
The April 19-24 Reuters survey suggested growth would slow in Nigeria 0.4% this year from official figures for 2022 of 3.1% and 2.0%, respectively.
These two economies make up more than half of the continent’s gross domestic product so substantially impact the region’s economic prospects.
“Two years of high inflation and tightening monetary conditions mean that households in Nigeria are in for a tough 2023,” said Jacques Nel, head of Africa macro research at Oxford Economics.
Nel added the growth hot spots will again be in east and west Africa, but the former regional champions, Kenya and Ghana, will undoubtedly lose those titles this year.
This has been a problem for Nigeria since a commodity price slump in the years prior to COVID-19, as oil revenues are largely its main foreign exchange inflows. It has not recovered from this and the outlook for gains in oil prices is muted.
However, a much bigger problem in Sub-Saharan Africa is extremely sticky inflation,
Inflation was expected to slow to a yearly average of 14.7% in 2024 from 35.4% this year, as authorities have administered 160 basis points of interest rate hikes in this cycle.
Analysts at Capital Economics reckon recently-released inflation figures from Sub-Saharan Africa’s two biggest economies are likely to put pressure on policymakers in Nigeria to raise interest rates further.
For the two, March consumer inflation numbers were higher than in February, confirming the fight against higher prices has not yet been won.
In the current hiking cycle Nigeria they have gone up by 650. However, further hikes are not widely expected in coming months.
Capital Economics said core price pressures showed no sign of easing in either Nigeria or South Africa and probably remain too high for policymakers’ tastes.
Large upside risks to the inflation outlook are another common theme in these two economies.
(For other stories from the Reuters global long-term economic outlook polls package:)