Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), says the purchase of foodstuffs by the government as palliatives is contributing to the galloping food inflation in the country.
Cardoso disclosed this in his contributions during the March monetary policy committee (MPC) meeting, which was published on CBN’s website
On March 25, MPC increased the interest rate from 22.75 percent to 24.75 percent, in a bid to tame inflation.
The country’s inflation rate in March jumped to 33.2 percent, up from 31.70 percent in February. Food inflation rate reached 40.01 percent in the same month, a year-on-year increase of 15.56 percentage points, compared to 24.45 percent in March 2023.
Commenting on inflation, Cardoso said inflationary pressure had failed to abate despite the hike in the interest rate in February.
“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 has 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, the 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 evidence of the impact of decisions reached at the 293rd MPC meeting. Staff reports show that the principal drivers of the 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, 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.”
The CBN governor further said 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 percent in February 2024 from 29.90 percent 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,” Bello said.
Bala also commended the federal government’s initiatives at addressing food insecurity, such as the release of grains from the strategic reserves, the distribution of seeds and fertilisers, and support for dry season farming.
