Abdullahi M. Gulloma and Misbahu Bashir
5 December 2007
Abuja — Inflation rate has been on the increase in the country since the beginning of the last quarter of this year due to increase in the prices of utilities, transport, hotel and tourism as well as education, Central Bank of Nigeria (CBN) Governor, Professor Charles Soludo, said yesterday.
He spoke at the meeting of the bank's Monetary Policy Committee (MPC) in Abuja. Professor Soludu explained that inflation increased from 4.1 per cent in September to 4.6 percent in October 2007. He said staff projections indicate that the year-on-year headline inflation would move from 6.8 percent in November and further up to 7.3 percent by the year-end as a result of demand pressures.
He however said that the increase in the inflation rate is expected to moderate in the first quarter of 2008, adding that the overall macroeconomic picture in 2007 reflects improved stability.
"The Bank's projection shows that the headline inflation could remain single- digit in the first quarter of 2008 provided CBN continues to take proactive steps to manage the liquidity surfeit. There remains a strong upside risk to inflation in the near-term due to expected large capital inflows and significant fiscal injections" he said.
Professor Soludu also disclosed that the country's gross official reserves have increased to about $50 billion in November this year representing 18.06 increase, stressing that the level of the reserve would support approximately 23 months of current foreign exchange disbursement.
The CBN Governor also spoke on the exchange rate, saying that there was a steady appreciation in the naira exchange rate, particularly in the second half of this year.
According to him, naira exchange rate appreciated from N127.43 per US$1 in June to N124.28 per US$1 in September and further to N120.63 per US$1 in November this year, representing about 7.0 percent.
He said appreciation of the naira was as a result of the rising private foreign exchange inflows and the increased demand for the currency.
He said also that credit to the private sector has maintained an upward trend this year, adding that "volatility in the inter-bank short-term rates continued to ameliorate during the year, as rates fluctuated within the interest rate corridor up to October."
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