Emmanuel OchayiThe Governor of the Central Bank of Nigeria, Olayemi Cardoso, has stated that the government’s large-scale purchase of foodstuffs as palliatives is contributing to the country’s rising food inflation.
This statement was made during the March Monetary Policy Committee meeting, where the benchmark interest rate was increased to 24.75% to combat the situation.
Join our WhatsApp ChannelDespite this effort, Nigeria’s inflation rate accelerated to 33.2% in March, with that of food reaching 40.01%. The National Bureau of Statistics attributed this surge to rising prices of essential items like garri, millet, and yams.
The Federal Government had approved N5 billion for each state and the Federal Capital Territory to procure food items for distribution to low-income people, following the removal of fuel subsidy.
Cardoso noted that inflationary pressure persists despite the February interest rate hike, and that “seller inflation” from commodity market structures and government purchases for palliatives are adding to food price inflation. He emphasized that these new sources of inflation require fiscal authorities’ attention to complement monetary policy efforts.
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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.”
Another committee member, Bala Bello, echoed the concern, stating that inflation is “unacceptably high” and requires decisive and coordinated efforts to curb its adverse impact on citizens’ purchasing power, investment decisions, and output performance.
The Federal Government’s initiatives to address food insecurity, such as grain releases and support for dry season farming, are commendable, but more needs to be done to tackle the rising inflation.
“The principal drivers of acceleration in inflation are hikes in food and energy prices associated with structural factors… huge purchases by the government for distribution as palliatives to the vulnerable citizenry is adding another dimension to the food price inflation.” – Olayemi Cardoso, CBN Governor
“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.” – Bala Bello, MPC member.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
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