Nigeria’s inflation rate rises to 31.70%
Published By: Paul Dada
By Oluwagbenga Oyebanji
Subsidy removal and floating of the Naira entirely triggered inflation in the urban and rural Nigeria as indicated by National Bureau of Statistics on Consumer Price Index for February 2024 on food inflation which rose to 37.92%. The Governor of Central Bank (CBN), Mr. Olayemi Cardoso guaranteed Nigerians that the high inflation witnessed throughout the nation would cool off by June-July 2024.
The fiscal side and monetary policy must work together to have economic development and growth. The fiscal policy is the tool by the executive to develop the economy using revenue allocation, derivation, expenditure both recurrent and capital, and tax collection. Monetary policy is primarily the tool by the central bank to regulate money supply, interest rate, exchange rate and a prompt supervisory role over all the financial institutions in the economy.
The causes of inflation in the economy are sensitive and have gotten the attention of the policy makers and corporate leaders. Consistence increase in money supply to the economy is the primary cause and a central bank that is dependent on the executive arm of the government. Inflation is affecting the economy and it’s envisaged to be at 29.1% this year and cooled down to 17.2% next year. The standard of living has been the first hit by inflation reducing people’s purchasing power and discouraging savings. Food, transport and housing are sensitive to living wage standards. The clamor by NLC that Federal government should increase living wage to N615, 000 is political and not realistic.
According to the Acting Director Banking Supervision of CBN, Dr. Adetona Adedeji, “The ultimate objective is for us to combat inflation. This is exactly what the central bank is doing today. Whatever it takes to fight inflation, we are going to do that. It may have an impact in some areas.” High inflation has a great impact on people’s income increasing poverty and misery index in the country.
Federal Government and CBN have to implement policies that would subdue the high inflation in the economy. The debt profile of N97.34 trillion ($108.23 billion) as of December 2023 according to data from Debt Management Office (DMO), really devalued the Naira and brought about high uncertainty in the economy.
The cost of doing business is key to reducing inflation because production of goods and services are functions of conducive and friendly environment for growth in the economy. Prices of staple foods have increased beyond the people’s expectation. The uncertainty in price control is taking toll on the citizens’ welfare and standard of living.
The major ingredient of supply shock in Nigeria’s economy is subsidy reforms of the federal government which is removal of fuel subsidy without a proper structural economic reform.
Repositioning the economy is by thorough structural economic reforms which would have impact on cost of doing business.
The World Bank Macro Poverty Outlook for Nigeria April 2024 forecasted that Nigeria’s economy would grow by 3.5% from 2024 to 2026. The Global Apex Bank retorted, “This growth is faster than the increase in population. However, this growth depends on the country continuing its current economic reforms.” The World Bank also projected that inflation would be at 24.5% in 2024 and reduced to 15.1% at 2026.
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Stabilizing the oil sector by liberalizing the downstream and the mid-stream sector would bring increase in production and reduce pressure on the foreign exchange. The subsidy removal would amount to waste of effort if Nigeria cannot halt fuel importation. The four public refineries and more private refineries are needed to be operational in the economy.
Comprehensive reforms are expected in the power sector, agriculture, health care, education and infrastructural development for macroeconomic stabilization. Reducing unemployment by a private sector led economy would unlock the potentials of Nigerian youths. The money supply outside the banking system increased to N3.89 trillion 2024, prompting the CBN to hike interest rate to 24.5% at the last CBN (MPC) meetings.
PBAT has rededicated most of his economic reforms to macro-economic stabilization. The consequence of the reforms has brought mixed feelings to many Nigerians due to high cost of living. The potentials of the economy could not be underestimated; Nigeria has the capacity to be a $1Trillion economy by 2030 based on GDP. For this dream to be actualized there must be a political will by all the 36 Governors to increase their states IGR by creating a conducive environment for business and making it a responsibility to reduce cost of governance. Reducing unemployment and inflation to single digit should be the focus of all policy makers.
The entrepreneurial spirit of our youths could only be unlocked when we have a policy that takes into account the youths as the essence of policy making. PBAT has shown Nigeria’s resilience and tenacity by removing fuel subsidy and floating the exchange rate simultaneously. Nigeria would be great by creating an all inclusive economy for all to contribute their quota. The human resources are enormous because building an economy that caters for all is the secret of unlocking the hidden potentials of Nigeria.
Oluwagbenga Oyebanji is a
Public Analyst and can be reached through [email protected]