Nigeria’s Inflation Surge Puts Pressure on Central Bank for Decisive Action

In the wake of the National Bureau of Statistics’ latest report, Nigeria’s inflation rate has hit a staggering 31.70% in February 2024, up from 29.90% in January. This alarming rise has placed immense pressure on the Central Bank of Nigeria (CBN) to implement effective anti-inflationary measures.

The CBN, which had not anticipated such a steep increase despite its tough measures, is now under scrutiny. At the Monetary Policy Committee (MPC) meeting held on February 26 and 27, the CBN had raised the benchmark interest rate—the Monetary Policy Rate (MPR)—by a significant 400 basis points to 22.75% from 18.75%, marking the highest level since 2006. Additionally, the Cash Reserve Ratio (CRR) was increased from 32.5% to 45.0%.

Despite these efforts, analysts have criticized the MPC’s decisions, arguing that not only are they unlikely to curb inflation, but the significant hike in the MPR could also negatively impact economic growth. Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), expressed concerns that the MPC’s decisions would further affect the country’s real sector, already grappling with several macroeconomic challenges.

The NBS attributed the rise in the annual rate of food inflation to increased prices of bread and cereals, potatoes, yam and other tubers, fish, oil and fat, meat, fruit, coffee, tea, and cocoa. On a month-on-month basis, the food inflation rate in February 2024 was 3.79%, which was 0.58% higher compared to January 2024.

The average annual rate of food inflation for the 12 months ending February 2024 over the previous twelve-month average was 30.07%, a 7.95 percentage points increase from the average annual rate of change recorded in February 2023.

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As the CBN grapples with these challenges, Governor Olayemi Cardoso has assured citizens that the bank is committed to tackling inflation. However, details on the specific strategies to be employed remain sparse.

The situation calls for a delicate balance between controlling inflation and fostering economic growth, with the CBN’s next steps being crucial for the nation’s financial stability and the well-being of its citizens.

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