Globally, this is not the best of times for any economy, particularly Nigeria. The battle against COVID-19 pandemic had barely settled and economies began to struggle to shake off the impact when Russia invaded Ukraine, disrupting world composure. Since February 2022 the world supply chain has been disrupted and prices of goods and services have risen astronomically.
Nigeria’s situation is even more complicated as it is challenged locally, and exogenously – insecurity has affected food production, and the Russian- Ukraine war has crippled the global food supply chain.
The Central Bank of Nigeria (CBN) hitherto reluctant, believing in the efficacy of its monetary tools has yielded to global reality and in two quick successions, after almost two and half years, jerked up the interest rate from 11.5 to 13 percent in May, and 14 percent in July. Even at the height of the COVID-19 pandemic the Bank held on for years deploying policies to sustain the economy.
Expectedly, the Bank’s mandate as provided for in the BOFIA Act 2020 (as amended) has price stability as one of its core responsibilities being an ingredient for sustainable growth. It is also charged with the responsibility of achieving a stable financial system and an efficient payments system. Therefore, whenever there is inflation in the land as it is currently, the CBN is always home to confront it. The Central Bank of Nigeria’s stance towards confronting inflation dates back to 2014 when its current Governor assumed office. Interest rate then was influenced by domestic liquidity conditions and global economic factors such as sharp drop in international crude oil prices, tapering of quantitative easing by the United States Federal Reserves Bank, and dwindling foreign reserves.
However, global tensions, and economic recession of 2016 most importantly, provided Nigeria with some lessons and steps needed to be taken to improve the wealth base of the economy. Consumer Price Index (CPI) in Nigeria increased to 455.40 points in June 2022 from 447.20 points in May of 2022. CPI in Nigeria averaged 127.55 points from 1995 until 2022, reaching an all-time high of 455.40 points in June of 2022.
Consumer Price Index is an important economic metric that measures the average change in prices (inflation) paid by consumers over a period for goods and services. The Nigeria Bureau of Statistics (NBS) posted 18.6 percent inflation rate for the month of June 2022 compared to 17.75 percent in the corresponding month 2021, and ever since inflation has taken flight up north.
Prior to Russian invasion of Ukraine, a major distributor in world food supply chain, Nigeria had been battling galloping inflation mainly caused by internal insecurity – such as banditry, kidnapping, crude oil theft, and sabotage of oil pipelines etc., in addition to obvious structural defects, present, and past administrations in the country have failed to address. Unfortunately, Nigerians are blaming the CBN for the economic hardship being experienced in the land.
Obvious fiscal deficit, and government inability to arrest insecurity and put in place structures to aid economic development are palpable reason why many felt the CBN’s interventions are defective. Inflation, from the ongoing, has apparently blighted the gains of measures taken by the CBN to bolster the Naira through various programmes and policies in key sectors aimed at diversifying the economy. Measures taken were also to open other sources of revenue to the country.
However, the fate of the Naira, because of rising inflation has made borrowing become not only expensive but unattractive. Inflation has also engendered general increase in prices of items and other essential commodities making existence more challenging. These, and many more global happenings, may have prompted the CBN’s Monetary Policy Committee at its last meeting to jerk up Monetary Policy Rate (MPR) by 100 basis points (from 13 – 14 percent). Nigerians eagerly hope to see how effective the decision would be.
My worries: why do the elites continually blame the monetary authority for the economic woes? I can recollect many of the CBN’s Governor admonitions to the government on insecurity, borrowings, fiscal discipline, and economic diversification. The CBN at a time was also accused of biting more than it could chew by practically intervening in every sector of the economy, as nothing worthwhile was coming from the fiscal side to help the economy.
Some Nigerians asked whether the Bank had ‘swallowed’ the fiscal authority as the CBN was the only government institution seen to be working in the economy. Many of the Bank’s intervention programmes – the Anchor Borrowers’ Programme, MSMEDEF, NIRSAL, CIFI, AGSMEIS, PAIF, among others were not only deployed to put the economy on the path of growth but to create jobs that are stable and sustainable.
The Bank at the onset of the COVID-19 pandemic rallied the private sector on a rescue mission, code name CACOVID, and their intervention saved the economy from a second economic recession in five years. All these efforts were because of fiscal absence in the critical sector that were supposed to spur growth and create jobs.
These elephants in the room seem to be blighting the Emefiele-led CBN achievements, particularly, the intractable insecurity in the country. The inability of the government to arrest the situation, and its economic implication has been colossal. Many companies have relocated while many have closed. Farmers can no longer farm as they have been chased away from their farmlands. This is despite the CBN’s interventions by making credit available to businesses and farmers. Critical stakeholders in the economy had expected the fiscal space to complement the CBN by dealing squarely with insecurity and providing basic infrastructure to grow the economy.
Corruption, another big elephant in the room, is waxing unrestrained. The CBN policy of Loan to Deposit Ratio (LDR) has ensured free flow of credit to the private sector to enable them to produce locally and increase capacity to fill the gap occasioned by the ban on certain items by the government. However, contraband goods are still finding their way into the country through the borders.
Food inflation is snuffing breath out of Nigerians and it was high time the government addressed these issues for the benefit and welfare of all. This is because Nigerians are indeed groaning.
–Feranmi writes from Kabba, Kogi State