The Central Bank of Nigeria (CBN) has indicated that prevailing inflationary pressures will likely persist in the near term, as outlined in its second-quarter economic outlook report.
The bank cited several factors contributing to this scenario, including the removal of fuel subsidies, the depreciation of the naira, expected upward adjustments in wages and electricity tariffs, and the adverse impact of climate change on agricultural activities. These elements are expected to sustain the upward trajectory of inflation in the short run.
The CBN emphasized;
“Inflationary pressures may exist in the near-term because of the removal of fuel subsidies and subsequent higher prices of premium motor spirit, and the depreciation of the naira. Moreover, the anticipated upward review of wages and electricity tariffs, alongside the adverse effects of climate change on agricultural output, is likely to induce further inflationary pressures.”
However, the CBN offered a tempered outlook, cautioning that tight monetary policies and global improvements in supply chains could contribute to slowing down the inflation rate in the future. The report stated,
“Notwithstanding, the sustained tight monetary policy stance, coupled with improvements in global supply chains, are both expected to help dampen inflation.”
Background:
In October, Nigeria’s inflation rate reached 27.33%, marking an 18-year high and continuing a ten-month streak of increased inflation. Food prices, notably, played a significant role in this rise, surging to 31.52% from the 30.64% recorded in September.
President Tinubu declared a state of emergency on agriculture in June, highlighting its importance to national security. Beyond food prices, the removal of fuel subsidies in June contributed to increased transportation costs, further impacting inflation figures.
Despite the Central Bank’s efforts, including a 25-basis-point interest rate hike at its last Monetary Policy Committee (MPC) meeting, inflation has continued to rise. The policy direction under the leadership of Yemi Cardoso remains uncertain, adding complexity to addressing inflation concerns.
