Nigeria’s inflation rate is expected to moderate toward the end of fourth quarter of 2020, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), said on Tuesday.
Emefiele, in a keynote address at the 13th annual Chartered Institute of Bankers of Nigeria (CIBN) Banking and Finance Conference in Lagos, said the harvest season, along with the phased withdrawal on the restrictions of movement and other restrictions imposed as a result of COVID-19, would drive the moderation in inflation rate.
Nigeria’s Consumer Prices Index (CPI), commonly known as inflation, accelerated by 13.22 percent in August 2020, according to data released by the National Bureau of Statistics (NBS) Tuesday morning.
Inflationary pressure persisted in the 1st and 2nd quarters of the year due to several factors.
In addition to the disruption to global and domestic supply chains as a result of COVID-19, inflation was exacerbated by the increase in VAT rate, exchange rate adjustment and seasonal food supply shocks due to the onset of the farming season and other structural bottlenecks. Inflation in July 2020 stood at 12.8 percent.
Reacting to the rise in inflation rate, Uche Uwaleke, professor of capital market, Nasarawa State University, Keffi, said the uptick in inflation rate in August was expected and will likely continue till the harvest season sets in.
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This is particularly so given the fact that the inflationary pressure is coming more from the food component which increased by as much as 16 percent.
“It is not difficult to see where the pressure is coming from. The economy is still reeling from the negative impact of COVID-19 on the food supply chain. This situation is compounded by the border closure, increase in VAT, electricity tariffs, stamp duties and upward exchange rates adjustment by the CBN in order to ease the pressure on the forex market,” Uwaleke said.
The recent increase in pump price of fuel presents further downside risks to inflation, he said.
There is also the insecurity challenge affecting the food belts of the country which partly explains the high rate of food inflation, at over 20 percent, in a state like Kogi.
“As I mentioned earlier, I expect the inflation rate to moderate towards the end of Q4 2020 in the wake of the harvest season as well as a likely increase in external reserves following gradual recovery in crude oil price which helps stabilise exchange rate,” Uwaleke said.
“I also think the COVID-19 interventions by the government and the CBN, especially in the agric value chain, will begin to manifest in Q4 2020,” Uwaleke said.
He said the way forward to rein in inflation is for the government to tackle insecurity so that farmers can return to the farms and put in place a deliberate policy to promote large-scale mechanized agriculture.
This will involve scaling up interventions in agriculture, including through recapitalizing Development Finance Institutions such as the Bank of Agriculture, he said.
