Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso has attributed the increase in food prices in Nigeria to government purchases of palliatives.
Speaking at a recent event, Cardoso highlighted structural factors such as hikes in food and energy prices, seller inflation, and seasonal influences as key drivers of inflation in the country.
To counteract these challenges, the CBN is focusing on reducing the negative real interest rate to attract foreign capital and stabilize the exchange rate.
Cardoso emphasized the necessity of combining monetary policy with fiscal measures and structural reforms, particularly in critical sectors like agriculture, electricity, and energy.
He said:
“In the prevailing circumstances, it is my view that the argument for a further hike in Monetary Policy Rate (MPR) to complement the rate hike at the last MPC meeting is valid. This increase in the MPR will help curb inflationary pressure and reduce the negative real policy rate.
“Most importantly it will further strengthen the anti-inflationary signal of the Central Bank of Nigeria (CBN) as we transition to an inflation targeting regime.
“This, however, is predicated on the assumption that sustained fiscal and monetary policy coordination will result in policies that address the multitude of structural factors required for long-term investment and economic growth in Nigeria. Without addressing the structural issues in agriculture, electricity, and energy sectors we may continue to see persistent increases in food inflation.”
As part of its efforts to combat inflation and foster economic stability, the CBN has increased the monetary policy rate (MPR) by 600 basis points.
In March 2024, food inflation soared to 40.01% year-on-year, primarily due to escalating prices of staple foods.
The overall inflation rate in Nigeria climbed to 33.2% during the same period, with significant contributions from food and beverages, energy, and housing costs.
