The Governor of Central Bank of Nigeria, Olayemi Cardoso has said that government purchases of palliatives are a contributing factor to rising food prices in Nigeria.
This was disclosed in a statement by the Cardoso at the recent monetary policy committee meeting held between march 25 and 26, 2024, according to nairametrics.
According to the statement in the documents, Cardoso noted that new inflation drivers are emerging beyond the usual monetary factors.
CBN released a document which summarized the discussions of the MPC members.
He said, “Our first monetary policy committee (MPC) meeting held on February 26th and 27th 2024, was one month ago with a deliberate short date in the following month to enable us to review the impact of the initial 400 basis point hike in the policy rate.
“Despite notable stability in the foreign exchange market resulting from decisions taken at that 293rd MPC meeting, inflationary pressure remains unabated. While there is the argument that the significant tightening since the last MPC meeting is yet to fully permeate the system and yield its expected impact, the risk of galloping inflation persists.
“If such a hyperinflationary scenario is to become reality, available options to control inflation could be severely constrained. From the facts presented to the MPC, there is a clear indication that the monetary factors contributing to inflation are diminishing in their significance. This could be considered as evidence of the impact of decisions reached at the 293rd MPC meeting.
“Staff reports show that the principal drivers of acceleration in inflation are hikes in food and energy prices which are associated with structural factors. Further, new dimensions of inflationary pressure are emerging. first, ‘seller inflation’ arising from the oligopolistic structure of commodity markets such as noticed in the prices of local commodities is gaining significance.
“In addition, huge purchases by the government for distribution as palliatives to vulnerable citizenry is adding another dimension to the food price inflation, with seasonal factors of food price increases during religious fasting and festive periods, adding price cyclicality. some of these new sources of inflation are better addressed by the fiscal authorities to complement the efforts of monetary policy in achieving all round price stability.”
Recall that the CBN increased the MPR by 600 basis points so far, from 18.75% to 24.75% to mitigate inflation and foster economic stability.
