The playbook adopted by the Central Bank of Nigeria (CBN) to curb inflation seems ineffective amid persistent inflationary pressures. Inflation has consistently surpassed the 20 percent threshold since August 2022, accompanied by a sustained level above 15 percent since December 2021.
The CBN stipulated that the inflation rate must be single-digit, which means the annual inflation rate remains below 10 percent.
However, the report by the National Bureau of Statistics (NBS) indicates that inflation hit a whopping 22.22 percent on a year-over-year basis in April 2023, further threatening the country’s economy.
Under the leadership of Godwin Emefiele as the CBN Governor, Africa’s largest economy has been under steady inflationary pressure, this seems contrary to its goal of promoting price stability, supporting economic growth by maintaining single digit inflation.
The current numbers show a worrying trend; for example, the headline inflation rate in March 2023 was 5.40 percent higher than the headline inflation rate in April 2022, which was 16.82 percent. This suggests that inflation levels have risen alarmingly during the past 12 months.
Analysts say the situation is gloomy and also a reflection of Nigeria’s ongoing economic crisis from different parameters.
From what the report says, food and non-alcoholic beverages, which together account for a hefty 11.51 percent increase in the headline index, have been the main drivers. That is considered an increase of 3.72 percent. Housing, water, electricity, gas, and other fuels were also drivers.
Other industries that have seen inflationary pressure include alcoholic beverages, tobacco, and kola at 0.24 percent, restaurants and hotels at 0.27 percent, transportation at 1.45 percent, furniture, household equipment, and maintenance at 1.12 percent, education at 0.88 percent, health at 0.67 percent, miscellaneous goods and services at 0.37 percent, restaurants, and hotels at 0.27 percent, recreation, and culture at 0.15 percent, and communication at 0.15 percent.
Wole Famurewa, Independent Director, CardinalStone Securities, wrote, the numbers highlight the ongoing economic challenges we’re up against, despite the central bank’s increasingly hawkish monetary stance.
“Let’s not overlook the implications of persistently high inflation. It erodes the purchasing power of individuals and businesses, making the cost of living higher. It widens income inequality and plunges more people into poverty.
“Moreover, it creates economic uncertainty, which hampers investment and slows down overall economic growth.”
The CBN Governor, before his appointment in 2014 by former Nigeria President, Goodluck Jonathan, the inflation rate was 8.06 percent. He was retained and reappointed by President Muhhamdu Buhari for 2 terms (8years).
Under his leadership, the Monetary Policy Committee (MPC) of the CBN has consistently employed a significant tool to manage the economy: the gradual tightening of its key interest rate. Every time the NBS releases inflation rate figures, CBN increases interest rates.
As per the most recent raise, the rate underwent a notable increase, from 11% in April 2022 to an impressive 18% by March of the subsequent year under the CBN’s strategic direction.
Usually, this is a deliberate adjustment of the interest rate that aims to influence borrowing costs, regulate the money supply, and effectively mitigate inflationary pressures within the economic framework. But in the case of Nigeria, it seems counterproductive because the inflation rate keeps soaring.
Analysts expect further tightening measures to be announced at the upcoming MPC meeting scheduled for next week.
A further cursory look at the NBS report indicates the All-Items Index will climb by 1.91% month over month in April 2023, which marks a minor improvement of 0.05% compared to the 1.86% reported.
This means that, on average, the general price level in April 2023 was 0.05% higher than it was in March 2023.
With the average Consumer Price Index (CPI) for the 12 months ending in April 2023 showing a significant increase of 20.82% compared to the preceding 12-month period, a longer-term perspective suggests a concerning trend.
This increase of 4.37%, which is significantly higher than the 16.45% registered in April 2022, points to a consistently difficult economic climate.
From what was released, analysts say there is a critical need for quick-acting policies and plans to reduce Nigeria’s inflationary problems and promote economic stability in the months ahead.
“High inflation is just one of the pressing issues awaiting the incoming government,” Wole said. “We need effective policies and strategic reforms to stabilize prices, attract investment, and foster economic diversification. It’s a complex task, but one that is vital for our future prosperity.”
In a recent report, the World Bank issued a warning regarding Nigeria’s rapid inflation growth, which had a significant impact on the minimum wage of N30,000.
The report highlighted that this inflationary trend resulted in a 55 percent erosion of the minimum wage’s purchasing power and contributed to a widening poverty net, affecting approximately five million individuals in 2022.
The World Bank expressed its concern during the launch of the Nigeria Development Update for December 2022 and the Country Economic Memorandum in Abuja.
The Chief Economist of World Bank Nigeria, Alex Sienaert, emphasized that the cumulative inflation between 2019 and 2022 had reached 55 percent, significantly diminishing households’ purchasing power.
Furthermore, after adjusting for inflation, the real minimum wage in 2022 was estimated to be N19,355, which corresponded to approximately $26 in dollar value after accounting for both inflation and exchange rate depreciation.
These figures illustrate the adverse impact of inflation on the economy, emphasizing the need for measures to mitigate its effects and restore the purchasing power of households in Nigeria.
Nigeria expects the new President-elect to assume office on the 29th of May, while the outgoing President leaves Nigeria economically worse than he met it in 2015. Africa’s largest economy is not only confronted with rising inflation but other myriad burning issues.
The choices made by the new administration will have a profound impact on the course of Nigeria’s economy. It goes beyond mere passivity, as it calls for well-informed, engaged citizens, provides valuable perspectives, and actively participates in the dialogues that will determine the path ahead for Nigeria.
According to the former CNBC Anchor, addressing this persistent challenge is a crucial step toward reclaiming the strong economic growth the country experienced in the early 2000s.
However, as we enter this new chapter with fresh leadership, there is also room for optimism. We have an opportunity to embrace new perspectives, innovative strategies, and collaborative efforts to revitalize our economy.
Wole said Nigerians must closely monitor policy announcements and engage in constructive dialogue with the government and fellow stakeholders. Together, we can shape a favorable business environment that fosters growth and prosperity.