Curb the rising inflation




The National Bureau of Statistics (NBS), recently, released a mind boggling report to the effect that Nigeria’s inflation rate rose to 19.64 percent in July, the highest since September 2005. This is quite worrisome as it requires the urgent intervention of the nation’s economic managers, including the Central Bank of Nigeria (CBN) and the National Economic Council (NEC), to halt the hyper inflationary trend posing an existential threat to the citizenry.

The consumer price index (CPI), which measures the rate of change in prices of goods and services, surged 17-year high from 18.60 percent in the previous month. The increase was recorded against the backdrop of food inflation, which rose to 22.02 percent in July from 20.60 percent in June. The rise in the food index was caused by increases in prices of bread and cereals, food products, potatoes, yam and other tubers, meat, fish, oil, and fat.

The NBS, in its Consumer Price Index (CPI) report for July 2022, said that on a month-on-month basis, the Headline inflation rate in July 2022 was 1.817 %, which was 0.001% higher than the rate recorded in June 2022 (1.816 %).

“The percentage change in the average CPI for the 12 months period ending July 2022 over the average of the CPI for the previous 12 months period was 16.75%, showing a 0.46% increase compared to 16.30% recorded in July 2021,” the report said.

On a month-on-month basis, the report said food inflation rate in July was 2.04%, 0.01% insignificant decline compared to the rate recorded in June 2022 (2.05%). “This decline is attributed to a reduction in the prices of some food items like tubers, maize, garri, and vegetables,” the report said.

On a state-by-state basis, Akwa Ibom, Ebonyi and Kogi states witnessed the highest prices while Jigawa, Kano and Borno recorded the slowest rise in inflation. “In July 2022, all items’ inflation rate on a year-on-year basis was highest in Akwa Ibom (22.88%), Ebonyi (22.51%), Kogi (22.08%), while Jigawa (16.62%), Kaduna (17.04%) and Borno (18.04%) recorded the slowest rise in headline Year-on-Year inflation,” the report said.

“However, on a month-on-month basis, July 2022 recorded the highest increases in Adamawa (2.87%), Abuja (2.84%), Oyo (2.77%), while Bauchi (0.82%), Kano (0.83%) and Niger (1.03%) recorded the slowest rise on month-on-month inflation.”

Meanwhile, the ‘’All items less farm produce’’ or Core inflation, which excludes the prices of volatile agricultural produce, stood at 16.26% in July 2022, compared to 15.75% recorded in the previous month. On a month-on-month basis, the core inflation rate was 1.75% in July 2022, up by 0.20% when compared to 1.56% recorded in June 2022. The report said the highest increases were recorded in prices of gas, liquid fuel, solid fuel, passenger transport by road and air, garments, cleaning, repair and hire of clothing.

In apparent response to the seemingly intractable run-away inflation, the Central Bank of Nigeria (CBN) announced an upward adjustment of the negotiable minimum interest rate payable on local currency savings deposits to 30 per cent of the Monetary Policy Rate (MPR).

In September 2020, the apex bank, as part of efforts to mitigate the impact of the COVID-19 pandemic, had slashed the minimum interest rate payable on Naira savings deposits from 30 per cent of MPR to 10 per cent of MPR. The bank had explained that the move was aimed at stimulating growth in the larger economy following the economic slowdown caused by the pandemic.

The central bank, in a letter addressed to all banks and titled, “Review of Interest Rate on Savings Deposits”, which was dated August 15, 2022 and signed by CBN Director, Banking Supervision Department, Mr. Haruna Mustafa, stated that it became necessary to review the rate back to 30 per cent of MPR following the return of normalcy in the economy and considering the prevailing macroeconomic conditions.

According to the CBN, the effective date for the implementation of the new circular was August 1, 2022, and further superseded the earlier correspondence on the subject matter.

However, CBN while announcing the reduction of the minimum interest rate payable on local currency savings deposits to 10 per cent of MPR last year, observed, with satisfaction, the declining trends in market rates in the banking sector following the implementation of policies aimed at stimulating credit flows to the real sector, among others.

As a result, the apex bank reviewed interest payable on savings deposits as provided in its Guide to Charges by Banks, Other Financial and Non-Financial Institutions issued in December 2019. Consequently, the interest rate on local currency savings deposits was reduced to 10 per cent of MPR.

While we commend the proactive intervention of the CBN to cushion the adverse effect of the hyper-inflation on the populace by increasing the negotiable minimum interest rate payable on local currency savings deposits from 10 per cent to 30 per cent of the Monetary Policy Rate (MPR), we hasten to state that this alone cannot substantially address the crisis.

We, therefore, urge the central bank to, in addition to the hike in interest rate, halt the free fall of the naira at the international market. A stronger naira will go a long way to buoy up the nation’s economy, which import dependency is largely responsible for the hyper inflation.

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