The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has said that the federal government’s purchase of foodstuffs as palliatives is contributing to the country’s galloping food inflation.
He disclosed this during the March monetary policy committee (MPC) meeting, where the interest rate was increased to 24.75% to combat inflation.
Nigeria’s inflation rate jumped to 33.2% in March, with food inflation reaching a staggering 40.01%. Despite previous efforts to tame inflation, Cardoso noted that inflationary pressure remains unabated. He attributed this to structural factors, including hikes in food and energy prices, as well as emerging dimensions of inflationary pressure.
“Despite notable stability in the foreign exchange market resulting from decisions taken at that 293rd MPC meeting, inflationary pressure remains unabated,” Cardoso said. “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.
”Cardoso emphasized that the principal drivers of acceleration in inflation are hikes in food and energy prices, associated with structural factors. He added, “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 indigent citizens is adding another dimension to the food price inflation, with seasonal factors of food price increases during religious fasting and festive periods.
The CBN governor further stated that these new sources of inflation require fiscal authorities to complement monetary policy efforts. “The new sources of inflation are better addressed by the fiscal authorities to complement the efforts of monetary policy,” he said.
Another MPC member, Bala Bello, echoed a similar sentiment about the rising inflationary trend, saying, “Both food and core inflation rose in February 2024, underpinning acceleration in headline inflation to 31.70 per cent in February 2024 from 29.90 per cent in the previous month.” He added, “This continued rise in inflation was mainly due to persisting high production costs, lingering security challenges, and exchange rate pressures.”
While Bello commended the federal government’s initiatives at addressing food insecurity, such as the release of grains from the strategic reserves, distribution of seeds and fertilizers, and support for dry season farming, he stressed that 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.
