Inflation in Africa expected to slow

Inflation in key African economies will slow into 2025 but remain stubbornly high in Nigeria due to sporadic flooding and difficult terrain for the naira currency, a Reuters poll has found.

The acute shortage of dollars in much of the continent, including Angola, Nigeria and Zambia, has often put home inflation under significant strain due to a reliance on single commodity currency inflows such as crude oil and copper.

The poll of 15 analysts taken in the past week showed inflation would moderate more in countries with better diversified sources of dollar revenues such as Kenya.

Inflation in Nigeria is expected to quicken to 29.1% in 2024 from an average of 24.5% in 2023, before it slows to 17.2% in 2025. It hit a 28-year high of 33.2% in annual terms in March.

Nigerian central bank governor Olayemi Cardoso raised the monetary policy rate by 200 basis points to 24.75% in March after a 400 basis points hike in February.

Even with a more coherent monetary policy now in place and potential naira stability, Nigerian inflation will fall only slowly in 2024, Citi wrote in a note to clients.

FLOODING

The high inflation rate reflects elevated food price inflation, which accounts for about 50% of the consumer price index (CPI) basket and is only marginally affected by monetary policy, Citi added.

High food price inflation is a result of flooding seen in many parts of the country in recent years, the rising cost of fertiliser and continuing insecurity in many food-producing regions.

Ghana’s inflation averaged 40.3% in 2023 but is expected to slow markedly to 18.7% in 2024 and then to 12.1% in 2025.

Angolan inflation is forecast to slow to 2023’s average of 13.6% in 2025 from 23.7% in 2024, while in Zambia it was seen slowing to 8% in 2025 from 12.3% in 2024.

Inflation in Kenya will remain one of the most tamed in the region apart from SA, slowing to an average of 5.6% in 2025 from 6.3% in 2024, the poll found. Standard Chartered said it lowered its inflation forecasts to allow for recent Kenyan shilling appreciation and improved food prices. A separate poll earlier in April predicted inflation in SA would slow to 4.6% in 2025 from 5.1% 2024.