Muhammad Sani Abdullahi, Deputy Governor of the Economic Policy Directorate at the Central Bank of Nigeria (CBN), has forecasted a significant uptick in Nigeria’s headline inflation, projecting it to reach 32.63% by March 2024. This revelation was made during Abdullahi’s presentation at the CITI-CEEMA Macro Conference held in London on March 20, 2024.
According to Abdullahi, the anticipated surge in inflation is attributed to several key factors, including escalating energy costs, exchange rate fluctuations, and ongoing insecurity challenges plaguing the nation. A report obtained by Nairametrics outlined these factors, emphasizing the repercussions of fuel subsidy removal, currency depreciation, and disruptions to food production due to insecurity as primary drivers of the impending inflationary pressures.
Despite the grim outlook, the CBN remains cautiously optimistic, anticipating a reversal in inflation trends starting from May 2024. This optimism is grounded in strategic interventions aimed at curbing inflation, which include the adoption of an Inflation Targeting Framework, enhanced communication strategies, and a shift towards tighter monetary policies.
The CBN has already implemented significant adjustments in this regard, notably raising the Monetary Policy Rate (MPR) by 400 basis points to 22.75% and increasing the Cash Reserve Ratio (CRR) to 45% from 32.5%. Additionally, modifications to the asymmetric corridor around the MPR signal a robust stance on managing inflation expectations.
In February 2024, Nigeria witnessed a notable increase in its headline inflation rate, which rose to 31.70% from 29.90% in January 2024. This surge, despite the unprecedented hike in the MPR, underscores the structural challenges within the Nigerian economy. Murtala Sabo Sagagi, a member of Nigeria’s Monetary Policy Committee (MPC), emphasized the urgency of addressing underlying issues such as insecurity and food shortages to achieve meaningful outcomes in inflation control.
Without tackling these fundamental challenges, monetary policy adjustments alone may prove insufficient in effectively managing inflation rates. As Nigeria braces for the economic challenges ahead, the CBN’s proactive measures underscore its commitment to stabilizing the nation’s economy and mitigating the impact of inflation on its citizens.
Credit: Nairametrics (Text Excluding Headline)
