Nigeria, Angola Inflation Highest in Frontier Markets -Report
Top oil producing African nations, Nigeria, Angola are among other countries that have highest inflation rate in the frontier market, also with higher interest rates.
Annual inflation rates in Frontier Markets (FM) have generally moderated in recent months.
However, there are a handful of countries where that outcome has been less favourable with consumer price index (CPI) inflation rates proving sticky or showing outright increases, as highlighted in Fitch Ratings’ latest Frontier Vision chart pack.
The diverging trend is resulting in contrasting monetary policy steps with several frontier markets central banks loosening policy rates while others take the opposite stance, Fitch said in the report.
But rate loosening hasn’t be part of the monetary policy play in Nigeria where inflation accelerated to multi-year high of 34% in the month of May. Due to base effects, analysts however predicted that inflation pressure would ease in June, 2024.
Fitch Ratings noted that easing CPI inflation rates led central banks to cut policy interest rates in Armenia, Azerbaijan, Costa Rica, Georgia, Mongolia, Mozambique, Pakistan, Rwanda and Tajikistan.
On the other hand, the global rating agency spotted that inflation in Nigeria increased to another exceptionally high level of 34% year on year in May with the central bank lifting policy rates by 150 basis points to 26.25%.
Central bankers raised interest rates to combat inflation. There have been slow down in rates adjusted as inflation began to ease.
In the report, the National Bank of Angola raised rates to 19.5% from 19%, as inflation continues to rise, reaching 30.2% year on year in May.
Bank of Papua New Guinea increased the Kina Facility Rate by 50 basis points to 2.5% due to expectations of higher inflationary pressures.
Also, Bank of Zambia raised the Monetary Policy Rate by 100bp to 13.5% to contain inflationary pressures and address rising inflation expectations.
Inflation in Zambia has been on the upward trend since July 2023 owing to the weakening of the kwacha with rising prices of fuel and food – in particular maize grain.
The report also shows that while international reserves are stable or growing, there are some notable exceptions where the decline has been significant in recent months.
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