BUSINESS DAY NG
The reduced volatility of the naira, which has been more stable in recent months, has been identified as a factor contributing to the slowdown in imported inflation.
Analysts at FBNQuest said that the deceleration in imported food inflation could be linked to several elements. These include the decline in naira volatility during December, a reduced incentive to import food items due to the high cost of foreign exchange (FX), and the introduction of a 150-day import duty waiver on essential food items.
Although the overall impact of imported inflation on the headline reading remains less pronounced, the moderation is notable. Imported inflation eased to 41.29 percent year-on-year in December 2024, down from 42.29 percent in November, marking its first slowdown since September 2019.
Muda Yusuf, director and CEO of the Centre for the Promotion of Private Enterprise (CPPE), attributed the moderation in exchange rate volatility to a combination of regulatory reforms and periodic interventions by the Central Bank of Nigeria (CBN) in the forex market. According to Yusuf, the outlook for the exchange rate in 2025 leans toward further stability. This expectation is grounded in several factors, including the sustained improvements in foreign reserves, which currently exceed $40 billion. There has been an increase in reserve accretion driven by inflows from International Money Transfer Operators (IMTOs) and diaspora remittances. The CBN’s enhanced capacity to manage exchange rate volatility through periodic forex market interventions has also contributed to this outlook. The positive impact of $2 billion Eurobond proceeds on the country’s reserves and gains from the successful issuance of a $500 million domestic dollar bond further bolster optimism…
Connect with us on our socials: