Nigeria inflation rises to 12.3 pct, rate rise unlikely.

* Rate hike still seen unlikely in near term

* Central bank targets single digit inflation

* Food price inflation up to 14 pct vs 13.6 pct in Dec

Nigerian inflation edged up to 12.3 percent in January, data showed yesterday, taking it further from the central bank's single-digit target but unlikely to trigger a rise in interest rates.

Rising food prices are driving inflation but analysts said the Central Bank of Nigeria is likely to keep its benchmark interest rate at 6 percent for now given ongoing banking reforms and the political environment in the run-up to elections due by next year.

"Inflation remains stubbornly in double digits, but it does not do anything to change our outlook for monetary policy," said Razia Khan, head of Africa research at Standard Chartered.

"While resolution to the banking sector issues remain the top priority for the central bank, we believe the (benchmark rate) will remain on hold, with any hike associated with -- say, a lifting of fuel price subsidies -- only likely to come through in H2."

"However the political backdrop in Nigeria suggests that even this is unlikely."

January inflation edged up from a 12 percent year-on-year increase in December but was just below 12.4 percent inflation seen in November.

Central Bank Governor Lamido Sanusi said last week that monetary policy would target single-digit inflation.

However, his priority since taking office last summer has been to prevent a repeat of last year's banking crisis, which led to a $4-billion bailout of nine weakly-capitalised institutions.

The removal of fuel subsidies has long been discussed and would increase inflation pressures, but would also be politically difficult as the oil-producing country heads towards elections due by 2011, analysts say.

Food prices, which form the bulk of the consumer price inflation index basket in Africa's most populous country, rose 14 percent year-on-year in January, after rising 13.6 percent in December, the National Bureau for Statistics said on Tuesday.

The monetary policy committee, which is due to meet in early March, has held its benchmark interest rate at 6 percent since July, using other means to add liquidity and combat rising inflation.
Reuters.

'So naijafbi any ideas how we can bring down inflation to tolerable levels? Or any one else who knows the ways of finances can help us out>

Inflation is not necessarily bad, especially if it results from healthy economic activities. Indeed, it is well accepted that some minimum level of inflation is required for economic growth. However, the sources of inflation in Nigeria are not the healthy ones. Inflation in Nigeria results from such factors as poor infrastructure (e.g. power and energy), high rates and multiplicity of taxes and levies, irresponsible exchange rates system, unguarded budget deficits financed from Ways and Means Advances, corruption and a host of other illegal and unearned incomes, etc. Let us hope that things will change for the better soon.