Central Bank of Nigeria (CBN) has said that it will take necessary measures to bring the nation’s rising inflation under control.
The Governor CBN Olayemi Cardoso who disclosed this during Monetary Policy Meeting (MPC) said while monetary policy has been moderating aggregate demand, rising food and energy costs continue to exert upward pressure on price development.
The MPC of the Apex Bank increased the Monetary Policy Rate (MPR), by 50 basis points, from 26.25 per cent to 26.75 per cent.
The MPC also includes adjust the asymmetric corridor around the MPR to +500/-100 from +100/- 300 basis points, retained the Cash Reserve Ratio of Deposit Money Banks at 45.00 per cent and Merchant Banks at 14 per cent, and retained the Liquidity Ratio at 30.00 per cent
The apex bank re-emphasized its commitment to the Bank’s price stability mandate and remained optimistic that despite the June 2024 uptick in headline inflation, prices are expected to moderate in the near term.
The Governor noted that the prevailing insecurity in food producing areas and high cost of transportation of farm produce are also contributing to rising in food inflation in the country.
He said that members of the committee were, therefore, not oblivious to the urgent benefit of addressing these challenges as it will offer a sustainable solution to the persistent pressure on food prices.
He stated that the increasing activities of middlemen who often finance smallholder farmers, aggregate, hoard and move farm produce across the border to neighbouring countries contributed to the problem of scarcity of food stuff across the country.
The CBN at the MPC meeting expressed the need to put in check such activities in order to address the food supply deficit in the Nigerian market to moderate food prices.
The Committee expressed optimism with the recent stop gap
measures by the Federal Government to bridge the food supply deficit, especially the 150-day duty free import window for food commodities (maize, husked brown rice, wheat and cowpeas), amongst others, will moderate domestic food prices.
Meanwhile, Director of Capital Market Institute at the Nasarawa State University, Keffi, Prof. Uche Uwaleke, says the fiscal authorities have a strong role to play to drive down inflation.
The National Bureau of Statistics in its CPI report for June 2024, stated that domestic headline inflation rose to 34.19 per cent in June 2024 from 33.95 per cent in May 2024. According to the NBS, this was driven by continued rise in the year-on-year components of food and core inflation
He said, “I submit that as far as taming the current elevated inflation in Nigeria is concerned in view of its major non-monetary drivers, the fiscal side holds the ace.”
Prof Uwaleke expressed optimism that the Apex Bank may likely put an end to monetary tightening by its next MPC meeting in September.
According to Uwaleke, “having done 750 basis points between February and May this year, I had predicted they would do a minimum of 50bps or a max of 100bps in July.”
On the adjustment to the asymmetric corridor, Uwaleke expressed concerns noting that the communique did not provide any explanation for increasing the SLR from +100 to +500 and the SDR from -300 to -100.
“By implication, with an MPR of 26.75%, banks will now get loans from the CBN at 31.75% while they will be remunerated for their excess deposits at 25.75%. This will further squeeze liquidity from the banking system and jerk up cost of credit with adverse consequences on output and the equities market.
“The MPC communique should have made it clear why it was better to mask the tightening in the asymmetric corridor than reveal it in the MPR.
“May i observe that unlike previous MPC communiques, recent ones are silent regarding how the members voted? This information is useful at this stage even before their personal statements are published,” he said.
