July 12, 2021
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Although inflation has been declining for two months, monetary policy committee (MPC) members of the Central Bank of Nigeria (CBN) have raised concern over the impact the rising insecurity in the country could have on prices, particularly, on agricultural products.

Inflation backtracked to 17.93 per cent in May this year, having risen to 18.17 per cent in March. Though food inflation dropped from 22.72 per cent recorded in April 2021 to 22.28 per cent in May 2021, indicating the second consecutive decline in the food index, on month-on-month basis, the food sub-index increased by 1.05 per cent in May 2021, up by 0.06 per cent points from 0.99 per cent recorded in April 2021.

While the declining inflation was welcomed by members of the MPC, they were concerned that the rising insecurity in the country could further push up prices. This was evident in the personal statements of the MPC members made available by the CBN.

A member of the MPC, Festus Adenikinju, who said he was encouraged by the positive news on growth and inflation, noted that “the economic recovery rate is still very weak and fragile,” adding that “poverty and unemployment rates are still quite high.”

Adenikinju explained that “the security situation in the country is hurting economic recovery, while at the same time poverty and unemployment also contribute to the worsening security challenge we have. As we enter another planting season, the effect of climate change may have negative impact on food prices in later part of the year.”

He urged the CBN to use its administrative tools to rein in inflation, especially those coming from monetary impulses, and to expand the current intervention programmes targeted at boosting real consumption by households and production by SMEs.

“The current efforts of the CBN to promote dry season agriculture would be quite helpful. There is need to expand the targeted credit facility (TCF) and the agri-business/small and medium enterprises investment scheme (AGSMEIS) to ensure more Nigerians benefit from the programme” he said.

Chikwendu Asogwa noted that some inflationary pressures could emerge in the coming months, driven by supply side uncertainties, especially security challenges in food producing areas while adverse weather conditions may affect some cereals.

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“It is widely expected that inflation will remain on a downward spiral during the remainder of 2021. Further supply side fiscal and monetary interventions are needed to soften any likely pressures. Hopefully, existing weak demand conditions may also limit any strong pass-through to core inflation in the coming months,” he said.

On his part, CBN deputy governor, corporate services, Adamu Lamtek, maintained that with Nigeria projected to grow by about 2.5 per cent in 2021, the growth of the country is “below her potential and obviously not enough to significantly alleviate the unemployment situation.

“To spur all-round economic recovery and brighten the outlook for overall growth, fiscal actions must be aimed at supporting a wide range of activities including contact-intensive activities that have been heavily impacted by the COVID-19 pandemic.”

MPC Blames Insecurity For Surging Inflation(Opens in a new browser tab)

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