THE Governor of the Central Bank of Nigeria, Olayemi Cardoso, has stated that the government’s massive purchases of foodstuffs as palliatives are adding to the country’s skyrocketing food inflation rate.
He stated this in his March Monetary Policy Committee (MPC), which were published on the CBN’s website.
The MPC raised the benchmark interest rate to 24.75% from 22.75%.
The committee had said that its hawkish stance was to tackle inflation.
However, the country’s inflation rate rose to 33.2 percent in March, with food inflation reaching 40.01 percent, a year-on-year increase of 15.56 percentage points from 24.45 per cent in March 2023.
The National Bureau of Statistics attributes the increase in food inflation to higher costs for garri, millet, yam tuber, water yam, and other commodities.
Following the removal of fuel subsidies, the Federal Government allocated N5 billion to each state and the Federal Capital Territory to purchase food stuff for distribution to the underprivileged in their respective states.
In his remarks, the CBN governor highlighted that inflationary pressures had failed to abate despite the February interest rate hike.
He said, “Despite notable stability in the foreign exchange market resulting from decisions taken at that 293rd MPC meeting, inflationary pressure remains unabated. While there is the argument that the significant tightening since the last MPC meeting is yet to fully permeate the system and yield its expected impact, the risk of galloping inflation persists. If such a hyperinflationary scenario is to become reality, available options to control inflation could be severely constrained. From the facts presented to the MPC, there is a clear indication that the monetary factors contributing to inflation are diminishing in their significance.
“This could be considered as evidence of the impact of decisions reached at the 293rd MPC meeting. Staff reports show that the principal drivers of acceleration in inflation are hikes in food and energy prices which are associated with structural factors. Further, new dimensions of inflationary pressure are emerging. First, ‘seller inflation’ arising from the oligopolistic structure of commodity markets such as noticed in the prices of local commodities is gaining significance. In addition, huge purchases by the government for distribution as palliatives to vulnerable citizenry is adding another dimension to the food price inflation, with seasonal factors of food price increases during religious fasting and festive periods, adding price cyclicality.”
He went on to say that fiscal authorities should address the new drivers of inflation in addition to monetary policy initiatives.
Another committee member, Bala Bello, expressed a similar concern regarding the rising inflationary trend, stating, “Both food and core inflation rose in February 2024, underpinning an acceleration in headline inflation to 31.70 percent in February 2024 from 29.90 percent the previous month.” The ongoing rise in inflation was mostly due to persistently high manufacturing costs, lingering security concerns, and exchange rate pressures.
“Inflation is currently unacceptably high and requires decisive and coordinated efforts to curb it, given its adverse impact on citizens’ purchasing power, investment decisions and broad output performance.
According to Bala, the Federal Government’s measures to address food insecurity, such as releasing grains from strategic stockpiles, distributing seeds and fertilizers, and supporting dry season farming, are significant and laudable.
