Caging the Inflation Monster

Obinna Chima

Inflation in Nigeria, which has been on a steady rise since last year, has remained a source of concern to households, businesses and policymakers.

Precisely, the Consumer Price Index (CPI), which measures the rate of change in the prices of goods and services, increased to 27.33 per cent in October compared to 26.72 per cent in the preceding month, the National Bureau of Statistics (NBS) has stated.

The petrol subsidy removal in May, the floating of the naira exchange rate in June, as well as foreign exchange (FX) scarcity are major drivers of the country’s galloping inflation.

The NBS report also showed that year-on-year, the headline inflation was 6.24 per cent higher compared to 21.09 per cent recorded in October 2022.

According to the CPI report for October, year-on-year, food inflation rose by 7.80 per cent 31.52 per cent   23.72 per cent in the corresponding period 2022.

The NBS attributed the rise in annual food inflation to increases in prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, fruit, meat, vegetables and milk, cheese and eggs. Nonetheless, food inflation month-on-month fell by 1.91 per cent, representing 0.54 per cent drop compared to 2.45 per cent in September.

Inflation means different thing to different people. To the lay-man, inflation occurs when he is spending more money to purchase the same quantity of goods. On the other hand, to an economist, it is the general increase in price level over a period of time. 

No doubt, high inflation distorts consumer behaviour. It also destabilises markets by creating unnecessary shortages. Similarly, high inflation, which is not the desire of any economy, leads to income redistribution and brings about weak purchasing power.

That is why central banks globally are never comfortable with a rising inflation rate usually seen by them as ‘evil.’

The CBN’s Monetary Policy Committee (MPC) was expected to meet today and tomorrow, to marshall plan to address inflationary pressure in the country.  The monetary authorities must embrace the advice of former CBN Governor and a former Emir of Kano, Lamido Sanusi, who advised that they should implement strategic measures to combat rising inflation.

Sanusi, who recently visited the apex bank, stressed the importance of long-term planning and urged fiscal authorities to prioritise agriculture and education, particularly for girls. 

“The bank’s activities have a massive impact on the lives of Nigerians, and many people often do not know the impact of a central bank’s works until a central bank fails. 

“I urged the new leadership at the CBN to work persistently at driving down the rate, which had severely impacted the wealth of individuals,” Sanusi stated.

But the spokesman of the CBN, Dr. Isa AbdulMumin, is optimistic that the CPI figure for October, compared to September 2023, was a pointer to the fact that the central bank’s monetary policy stance to tighten rates and its money market reforms were yielding the desired effect.

According to him, available statistics showed that the first indication of deceleration in prices was recorded in September and further reforms in the money market, which commenced in October, had accelerated easing in prices as indicated by the substantial drop in month-on-month changes recorded in October.

“Moderation in month-on-month changes in prices observed in the headline, food and core components of the consumer basket followed reforms in the money market and relative stability in the forex market,” he added.

Therefore, it is expected that since Cardoso has pledged to prioritise the core mandate of price stability during his leadership at the CBN, with emphasis on price stability, Nigerians would be looking up to him to work towards achieving a single-digit inflation rate for the country as well as work in harmony with the fiscal authorities to address some of the structural imbalances in the economy that contribute to the inflationary pressure in the country.