Nigeria’s President, Muhammadu Buhari, and his government have lost control as Nigeria’s economic crisis sends that African nation into a doom-loop. Everyone, including the President’s wife, Aisha, knows that Nigeria is going down the tubes. But not the International Monetary Fund (IMF). As is often the case, the IMF doesn’t have a clue. The IMF’s October 2016 World Economic Outlook projects Nigerian inflation to average 15.4 percent for 2016. This number is in sharp contrast to my Johns Hopkins-Cato Institute Troubled Currencies Project’s inflation estimate for Nigeria. We estimate that the year-over-year inflation rate is currently 104.8 percent (see the chart below).
Why is the IMF so far off base? Because it is doing what it often does: it is taking the Central Bank of Nigeria’s (CBN) official inflation data at face value. That official rate averaged 14.3 percent from January to August of this year. For the IMF forecast to materialize, official annual inflation in Nigeria would need to average 17.6 percent for the September through December period. What did the latest inflation report from the Central bank of Nigeria show? According to the CBN, annual inflation was 17.9 percent in September. The IMF’s blind acceptance of the CBN’s data is a big mistake.