UPDATE 2-Nigeria's annual inflation rises in January as pandemic weighs

(Adds analyst comment)
By Chijioke Ohuocha
ABUJA, Feb 16 (Reuters) - Nigeria's annual inflation rose
0.72 percentage points to 16.47% in January from a month
earlier, its 17th monthly increase, the statistics office said
on Tuesday, as the effect of the coronavirus pandemic weighed on
the index.
Nigeria is facing its second recession in five years,
triggered by a coronavirus-induced crash in oil prices that has
hammered state revenue, creating large financing needs and
weakening the naira.
Inflation in Nigeria, which has been in double digits since
2016, worsened with the pandemic. Food prices rose 1.01
percentage point from the previous month to 20.57% in January,
the National Bureau of Statistics (NBS) said.
"This rise in the food index was caused by increases in
prices of bread and cereals, potatoes, yam and other tubers,
meat, fruits, vegetables, fish and fats," it said in a report.
The International Monetary Fund this month urged Nigeria to
phase out the central bank's financing of the government deficit
to reduce inflation.
The Fund said it expects inflation to stay in double digits
in the absence of monetary policy reforms, suggesting an
interest rate hike might be needed if inflation worsens after
the central bank cut rates twice last year to try to stimulate
the economy.
Nigerian officials told the IMF that inflation could reach
as high as 16% by year-end due to fuel and electricity price
hikes, but that the farm harvest of late 2020 is expected to
ease pressure on food prices.
"We think that inflation is probably close to a peak but it
will probably take until the second half of the year before the
headline rate drops back markedly," said Virag Forizs, Emerging
Markets Economist at Capital Economics.
"Currency weakness and FX restrictions will continue to put
upward pressure on inflation of imported goods."