October 2022 inflation report: Consumer prices are rising at a slower pace in many African countries

While inflation rates in the Sub-Saharan African (SSA) region remain at historically high levels, data shows that consumer prices in most countries accelerated at a much slower pace in October.

There has been a steady rise in the cost of living in the region since 2019, with countries reporting decade-high, double-digit figures. The most significant factors include covid-19 and the Russia-Ukraine war, both of which have disrupted the global economy.

African central banks have deployed measures, including interest rate hikes, to tame the ravaging inflation situation. Now, data shows that their efforts may be helping to ease price pressures.

Still, the World Bank warns that while hiking interest rates by central banks might prove helpful in reducing inflation, it could also push the world, especially developing economies, toward a global recession and a string of financial crises.

Key quote

“[The] recent tightening of monetary and fiscal policies will likely prove helpful in reducing inflation, but because they are highly synchronous across countries, they could be mutually compounding in tightening financial conditions and steepening the global growth slowdown.

“Policymakers in emerging market and developing economies need to stand ready to manage the potential spillovers from globally synchronous tightening of policies.”

— Ayhan Kose, the World Bank’s Acting Vice President for Equitable Growth, Finance, and Institutions.

Beware, African apex banks.

Now, Here’re the October 2022 inflation figures across Africa.

Vital data

Driving the numbers

Zimbabwe

• Zimbabwe’s Oct. inflation clocked in at 269% vs. 280.4% in September. That represents a month-on-month consumer price increase of 3.2% in October, down from the Sept. 2022 rate of 3.5%, according to the Zimbabwe National Statistics Agency.
• Despite the improving cost situation, a recent report by the World Bank ranked Zimbabwe as the country with the highest food price inflation in the world, with an increase of up to 30% this year.
• The World Bank opined that domestic food price inflation would continue to rise, especially in low- and middle-income countries, including African nations.
• In September, Finance Minister Mthuli Ncube said Zimbabwe’s economy would close this year growing less than the 4.6% previously predicted because of factors including high inflation and government spending cuts.

Nigeria

• The annual inflation rate accelerated to 21.1% in October from 20.8% in September, a slightly slower pace than economists predicted in a Bloomberg survey.
• Disruption in food supply chains, increase in import costs due to currency depreciation and rising energy costs have all been cited as factors contributing to the price pressures in the country.
• Annual food prices climbed to 23.7% from 23.3% in the previous month, while core inflation rose to 17.8% in Sept. from 17.6%.
• In its last meeting for the year, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria voted to increase the benchmark interest rate by 100 basis points to 16.5%, the fourth increase in a row and the highest since 2001.
• The MPC said the latest tightening implementation would help restore investor confidence while curbing the rising inflation rate.

Ghana

• While inflation in other African countries is decelerating, Ghana’s consumer prices have shown no sign of abating as the cost of goods and services continues to surge in the West African country.
• The country’s consumer price index increased to 40.4% from 37.2% in September, the highest level seen since July 2001.
• Food inflation also soared to 43.7% in October from 37.8% the previous month due to the increased cost of food items.
• The Ghanaian cedi has slumped by 57% since January. The cedi also recently ranked the worst-performing currency against the U.S. dollar.
• The Bank of Ghana’s monetary policy committee will decide whether to lift its key interest rate for a fifth time this year on Nov. 28. It has raised rates by 10 percentage points since March.
• Protests continue to erupt across the country, calling on President Nana Akufo-Addo to resign for failing to address the country’s soaring living costs. The worsening economic crisis in Ghana has compelled the government to consider a possible bailout from the International Monetary Fund (IMF).

East Africa

• The cost of living across the region increased drastically in recent months, with some regional economies now suffering double-digit inflation.
• Rwanda’s annual inflation rose to 31% in October from 23.9% in September. In Uganda, food and energy prices increased as the country’s inflation rate climbed marginally to 10.70% in October from 10% the previous month.
• Ethiopia’s inflation rate rose to 31.7% in October from 30.7% in September. Kenya also experienced a slight surge from 9.2% in September to 9.6% in October.
• Central banks in the region have raised lending rates to contain the rising inflation situation and boost their respective currencies. The National Bank of Rwanda increased its lending rate by 50 basis points (6% to 6.5%). Kenya’s central bank raised its benchmark rate from 7.5% to 8.2%, while the Bank of Uganda raised its from 9% to 10%.
• These tightening policies are yet to ease price pressures in the region.

The crypto angle

• Rampant inflation and depreciating fiat currencies are ensuring crypto remains an attractive option to young Africans as they turn to digital currencies and stablecoins to protect their earnings.
• However, the International Monetary Fund (IMF) called for an increase in the regulation of Africa’s crypto market, citing the collapse of FTX and its effect on cryptocurrency prices. According to the IMF, “the risks from crypto assets are evident …  [and] it’s time to regulate.”