By Vuyani Ndaba
JOHANNESBURG (Reuters) – Consumer inflation in Africa’s oil-rich economies will moderate in the coming year but remain stubbornly in double digits in the west of the continent as energy production capacity remains far from its needs, a Reuters poll found on Thursday.
As much as a petrodollar windfall is helping some Gulf Arab states pay down debt and protect citizens from inflation, Africa’s biggest oil producers are struggling in an environment that would welcome much more output amid the Russia-Ukraine war.
A poll conducted in the past week showed Angola, Nigeria and Ghana inflation would remain in double digits next year despite some huge interest rate hikes administered by central banks in the respective nations as well as bumper oil prices.
Oxford Economics Africa wrote that with price pressures persisting in Nigeria, and showing no sign of slowing, inflation would continue to rise and peak in Q4 2022.
“Nigeria is failing to gain the full benefit from elevated international oil prices, while paying an exorbitant price in subsidies to contain fuel prices and incurring more public debt to finance deficit spending,” said Pieter Scribante at Oxford Economics Africa.
Nigeria has struggled to produce as much oil as its OPEC quota allows, with production in Q1-2022 falling to only 1.49 million barrels/day, well below its target.
“For now, Nigeria does not have the spare capacity in place to significantly raise oil production,” wrote Razia Khan of Standard Chartered.
“We see only gradual changes in both oil production and the reform environment needed to allow faster growth,” Khan added.
Nigeria’s central bank raised its benchmark lending rate to 14.0% from 13.0% on Tuesday, now a cumulative 250 basis points since late May to slow inflation reported at 18.6% in June, its highest in more than five years.
Economists have found it extremely tricky to predict central bank interest rate decisions in West Africa due to unorthodox foreign exchange regulations that continue to hamper business and deter investment, particularly in Nigeria.
Growth in oil-rich exporting nations in the continent is expected to be mixed this year: a good recovery in Angola was predicted this year and next of 2.9%-3.0% from a World Bank estimate of 0.7% growth in 2021, while in Ghana and Nigeria it remains subdued from previous estimates.
The International Monetary Fund will work with Ghana’s government to develop a potential support programme, the IMF said after visiting the West African nation last week, citing a “challenging economic and social situation”.
Hundreds of people took to the streets of Ghana’s capital Accra last month to protest over high inflation, weak growth and a deteriorating local currency.
Growth in Kenya, East Africa’s biggest economy and due to hold general elections next month, was expected to slow to 5.3% this year from a World Bank estimate of 7.5% for last year.
Inflation there was expected to slow to 6.6% next year from 7.5% this year.
(For other stories from the Reuters global economic poll:)
(Reporting by Vuyani Ndaba; Editing by Mark Heinrich)
