Since last March, the US Federal Reserve (FED) has raised interest rates aggressively in response to high domestic inflation, putting pressure on import activity from other countries and regions. Some African countries have thus experienced an accelerated devaluation of their currencies. To ease inflationary pressure, many African central banks have raised interest rates and tightened liquidity, which might slow economic growth.
Charles Onunaiju, a Nigerian expert in international relations, pointed out that the economic indices and foreign trade of African countries, including Nigeria, are closely linked to dollar reserves, which means that the United States can transfer inflationary pressure to these countries. country through monetary policy.
Inflationary pressure imported from the United States has given a boost to the African economy plagued by galloping inflation. The African continent’s average inflation rate is expected to accelerate to 13.5% in 2022, driven by higher commodity prices, including energy and food, according to the African Economic Outlook. 2022 published by the African Development Bank.
Kenya’s inflation rate recorded a significant increase between July 2021 and July 2022, mainly due to a 15.3% rise in food and soft drink prices, according to the Kenya National Bureau of Statistics. In August 2022, the country’s inflation rate reached its highest level in five years, at 8.5%.
In Nairobi, the Kenyan capital, the cost of living is rising sharply. “The price of basic foodstuffs reached a scary level last month, and fruits are getting more expensive,” complained Chiku, a local trader.
The price spike is also affecting other African countries. Nigeria, Africa’s largest economy, recorded an inflation rate of 19.64% last July. South Africa’s inflation rate hit 7.8% in the same month, the highest level since the 2008 international financial crisis.
Zimbabwean Finance Minister Mthuli Ncube said Zimbabwe has long been under illegal sanctions by the United States and the West. Imported inflation exacerbated domestic inflation, which made the economy more vulnerable and devalued the local currency significantly.
In order to ease inflationary pressure, some African central banks have been forced to raise interest rates and tighten liquidity, which might slow national and regional economic growth. The economic outlook report also projects that Africa’s economic growth will be 4.1% in 2022, up from 6.9% in 2021.
Food inflation in Nigeria reached 23.12% in August, and many Nigerians have to spend 85% of their income on food, a survey has found. More than 14 million Nigerians are facing a severe food and nutrition crisis, a number that will continue to grow.
African countries are heavily dependent on imports of food and crude oil, Kenyan economist Ken Gichiga has said, blaming the rise in US interest rates to strengthen the dollar and directly increase the cost of imports of these commodities.
Many international investors had withdrawn from Africa due to rising interest rates, which affected the continent’s economic development prospects, he added.