By Ademola Alawiye

Inflation rate dropped by one per cent to 11.1 per cent in February, from 12.1 per cent recorded in January, the National Bureau of Statistics said in a statement on Tuesday.

Inflation rate had risen to 12.1 per cent in January, from 11.8 per cent the previous month, representing a 1.20 per cent increase.

The statement posted on the bureau’s website had stated that the year-on-year average consumer price level as at January 2011 for urban and rural dwellers rose by 7.9 and 15.6 per cent respectively.

Bloomberg, however, quoted the Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, as saying on March 4 that he might lift the benchmark interest rate for a second time this year, “as the government increases spending before next month’s election and food and oil costs soar.”

The Monetary Policy Committee of the CBN increased the rate by a quarter of a percentage point to 6.5 per cent on January 25 to help the CBN meet its target of bringing inflation below 10 per cent.

Sanusi had said in an interview with Bloomberg Television that “rising government spending and an advance in liquidity as the CBN recapitalises commercial banks are reasons for tightening monetary policy.”

He added that further rate increases would depend on the March inflation data.

While Nigeria is Africa’s biggest oil producer, it relies on fuel imports for more than 70 per cent of its domestic needs because of a lack of refining capacity.

The government subsidises domestic fuel prices, boosting its spending as oil costs rise, increasing pressure on inflation.

Crude oil had reached $106.95 a barrel on March 7, a 29-month high.

Source: Punch