Professor of Capital Market at Nasarawa State University, Uche Uwaleke, has applauded the federal government’s intervention in releasing grains from its grains reserves saying it mitigated food inflation.
Uwaleke made the assertion in a chat with Blueprint Thursday in Abuja.
The federal government had on May 2, 2020, directed the release of about 17,500 metric tonnes of assorted grains from the Yola National Food Reserve site for distribution as palliatives to Nigerians.
According to him, if not for the intervention, food prices would have been much higher than they are at the moment.
Inflation climbed to 12.34 per cent in April, the highest level in more than two years, from 12.26 per cent the previous month, the National Bureau of Statistics said, in its Consumer Price Index (CPI) report for the month of April 2020.
According NBS, food inflation, which accounts for the bulk of the inflation basket, rose at a much faster pace, to 15.03 per cent in April, compared with 14.98 per cent in March.
The statistics office attributed the rise in the food index to increases in the prices of potatoes, yams and other tubers, bread and cereals, fish, oils, fruits and vegetables. Food inflation has been in double digits for more than three years.
“This should be expected in view of the border closure and increased demand for food on the back of COVID’19 lockdowns. As a matter of fact, the rate of increase in food inflation could have been higher if the federal government had not released grains from the country’s strategic Reserves. The way to cage it is to ensure that the stimulus packages get to farmers so that more food can be produced locally in the coming months considering that the borders may not be opened anytime soon due to COVID’19,” he said.
The former Imo State finance Commissioner also noted that rising inflation rate posed a challenge to monetary policy especially in the face of the need to stimulate economic activities through a lower interest rate environment and rescue the economy from recession.
The implication, according to Uwaleke, is that the CBN will next Monetary Policy Committee meeting
He said the situation puts the CBN in a dilemma.
“I expect the MPC to weigh the balance of risks in favour of economic growth in their next meeting. Because the impact of COVID’19 on the economy will feature prominently in the next MPC meeting, my expectation is that members will vote to retain all the parameters including the MPR at 13.5% to take care of rising inflation and the pressure on exchange rate except the Cash Reserve Ratio which may be dropped from 27.5% to possibly its previous level of 22.5% to allow the banks more liquidity room.
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“I sense the CBN Governor may seize the opportunity of the meeting to announce some heterodox measures aimed at aiding financial intermediation by the Banking sector,” he added.