NIGERIA'S INFLATION TO STAY ABOVE 10% IN 2010, 2011 â€“ ANALYSTS
Nigeria's economy is set to grow by 6.3 per cent this year and consumer inflation should stay in double digits through 2011 as the government slashes fuel subsidies and increases budgetary spending, a Reuters poll showed on Thursday.
A poll of 11 analysts forecast Nigerian inflation to average 12.6 per cent in 2010 and 11.5 per cent next year.
That marks an acceleration since a previous poll in January, which forecast 11.4 per cent inflation this year but did not forecast inflation next year.
The National Bureau of Statistics last week estimated March inflation at 11.8 per cent.
'Inflation will be sustained at a high level as the effect of fuel price deregulation and expansionary fiscal policy becomes apparent,' said analyst for London-based Business Monitor International, Alan Cameron
The poll forecast sub-Saharan Africa's number two economy to grow by 6.3 per cent this year, down slightly from 6.7 per cent last year and compared with a forecast for 6.4 per cent growth in a previous poll in January.
Analysts expected the budget's fiscal deficit to grow by 3.5 per cent this year, according to the poll, below government expectations of more than five per cent.
Central Bank of Nigeria Governor, Mr. Lamido Sanusi, warned last week that double-digit inflation was a threat, but his top priority remained stimulating economic growth and getting credit flowing in Africa's biggest energy producer.
The central bank last week forecast Gross Domestic Product growth to average 7.5 per cent in 2010.
'Nigeria's balance sheet remains strong,' said chief economist at NKC Independent, Thalma Corbett. 'Continued strong growth in the services and agriculture sectors will boost economic growth, as will oil output expansion.'
Sanusi has backed federal efforts to deregulate the fuel sector, saying it might cause a brief spike in inflation but the economy would benefit in the long run.
Despite vying with Angola as Africa's top oil producer, Nigeria imports some 85 per cent of its fuel needs because of the disrepair and mismanagement of the four state-owned refineries.
Fuel subsidies cost the government more than $4bn a year.
Analysts said increased government spending this year would also contribute to double-digit inflation.
Acting President Goodluck Jonathan on Thursday signed into law a N4.608tn budget, which lawmakers hope would help Nigeria out of a downturn.
The poll's forecast that the fiscal deficit would grow by 3.5 per cent this year, below government expectations of more than five per cent, was based on weaker-than-expected capital spending projections.
'We see the fiscal deficit coming in below official expectations given that the capital expenditure component of the budget is unlikely to be fully implemented,' Cameron said.
More than a third of this year's budget is for capital spending on areas including infrastructure, the power sector and development in the oil-rich Niger Delta.