Jonathan Nwokpor
According to Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), one factor driving the nation’s skyrocketing food inflation is the government’s massive purchases of food items as palliatives for distribution to individuals in need.
In his remarks at the March Monetary Policy Committee meeting, which were posted on the CBN website on Monday, Cardoso disclosed this information.
The MPC increased the benchmark interest rate from 22.75 per cent to 24.75 per cent during the Monetary Policy Committee meeting, citing the move as an attempt to combat inflation.
According to the Nigerian Bureau of Statistics (NBS) April Consumer Price Index data, the nation’s inflation rate rose to 33.2% in March.
Additionally, the food inflation rate increased to 40.01 per cent in March 2023, up 15.56 percentage points from 24.45 per cent in the same month the previous year.
The governor of the CBN stated that despite the foreign exchange market’s noticeable stability, inflationary pressure has not decreased.
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,” he added.
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I once said at the instance of recent MPR increase, that it can’t work effectively, considering the previous trend. I think the Apex Bank Governor has came to realise the stark realities of my observation. From the trends, I realised that, the more the MPR increase, the higher the inflationary pressure. This has been true because, the assumed excess liquidity looks a mirage. The currency has been in the wrong hands – the government and not the business public. If you increase MPR, you constrained the gwnuined business public and not the government. The frugality and curruption tendency of our government would not allow those economic principles work for us.