Olayemi Cardoso, Governor of the Central Bank of Nigeria, has stated that the government’s massive purchases of foodstuffs as palliatives are adding to the country’s skyrocketing food inflation rate.
He expressed this in his remarks to the March Monetary Policy Committee, which were published on the CBN’s website.
The MPC raised the benchmark interest rate to 24.75% from 22.75%. The committee stated that its hawkish attitude aimed to combat inflation.
The committee had said that its hawkish stance was to tackle inflation.However, the country’s inflation rate accelerated to 33.2 per cent in March, with the food inflation rate reaching 40.01 per cent, a year-on-year increase of 15.56 percentage points from 24.45 per cent in March 2023.
According to the National Bureau of Statistics, the surge in food inflation could be attributed to rising prices for items such as garri, millet, yam tuber, water yam, and others.
Following the removal of fuel subsidy, the Federal Government approved N5bn for each state and the Federal Capital Territory to enable them to procure food items for distribution to the poor in their respective states.
In his comments, the CBN governor noted that inflationary pressure had failed to abate despite the hike in the interest rate in February.
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 further said that the new sources of inflation were better addressed by the fiscal authorities to complement the efforts of monetary policy.
Another member of the committee, 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.
This continued rise in inflation was mainly due to persisting high production costs, lingering security challenges 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 initiatives at addressing food insecurity, such as the release of grains from the strategic reserves, distribution of seeds and fertilisers, and support for dry season farming, are important and commendable.
