Due to supply-side factors related to the coronavirus pandemic as well as the upward adjustments in taxes and administered prices we see inflation breaching the 6 percent upper bound before it falls back within the range in the first quarter of 2022.
Effective in April, the government hiked value added tax (VAT), increased the fuel levy and introduced a new tax on sugar-based drinks, which the central bank expects to drive prices higher.
Annual inflation was 3.4% in 2020, picking up in the second half of the year after the VAT hike. The first half had seen mild inflation, following a deflationary trend in 2019, when the annual rate was -2.1%.
They added that Sunak must also help the economy -- which has shrunk by around 10 percent owing to the pandemic -- adjust to the "triple challenge" of Brexit, Covid and the green energy transition.
"The Nigerian economy is at a critical juncture. Policy adjustment and reforms are urgently needed to navigate this crisis and change the long-running lackluster course," it said.
Nigeria collects the equivalent of 5.7% of gross domestic product in tax and the government mostly relies for revenue on crude sales.
