Single-digit inflation eludes Nigeria in 72 consecutive months

Nigeria in the last 72 consecutive months (6 years), has been entangled in the web of the double-digit inflation rate and despite the various policies put in place by both the government and the Central Bank of Nigeria (CBN) to wriggle the economy out of this ‘double-digit’ conundrum, it just seems to be getting worse. It seems as though Nigeria’s inflation rate has a mind, spirit, and life of its own.

The last time Nigeria witnessed a single-digit inflation rate, President Muhammadu Buhari had not yet taken a seat in office. Data from the National Bureau of Statistics (NBS) reveals that the last time Nigeria witnessed single-digit inflation was in January of 2016 with its headline rate pegged at 9.62 percent.

With growing inflation rate threats over the years, the CBN in conjunction with government officials threw various policies at it to dampen the potency of inflationary pressures that bedevilled the purchasing power of many Nigerian households.

Among these policies include the Anchor Borrowers’ Programme by the CBN which was meant to grow food production and subsequently dampen food inflation which has been fueling headline inflation in the last 3 years. Currently, out of the total sum of N91.87 billion released by the CBN for the programme, only N14.68 billion has been repaid.

Other policies that have failed to achieve the single-digit inflation target include the consistent/steady MPR (Monetary Policy Rate) decisions by the CBN during MPC meetings and the Loan-to-Deposit-Ratio (LDR) policies which were meant to jack up credit and grow the economy. The CBN believed that if they grew the economy, inflation would crash.

Then we have the exchange rate stabilization which was fixed at N305/$1 between 2016 and 2019. The CBN believed that stabilizing the exchange rate was going to dampen the potency of double-digit inflationary pressures and like all the other policies, it flopped.

Read also: EXPLAINER: Why Nigeria’s inflation rate grew in the last 9 Decembers

The Federal government then resorted to blocking the borders for almost 9 months and like other contemporary policies before it, the policy backfired. Food prices (within the period when these borders were closed) skyrocketed beyond FG’s imagination and subsequently fueled to headline inflation.

The MPC also misfired at some point in their Inflation-tackling policy decision. Rather than raising rates to fight inflation, they decided to cut rates and thus promoted economic debt. This thus brought the country back to its status-Quo.

Omobola Adu, a Senior Investment Officer at Afriinvest stated “It’s not as though these economic policies have not had any impact on inflation. It’s just that the impact is almost insignificant because of the double-digit threshold of inflation and its impact on the purchasing power of households.

“We could see inflation fluctuating and oscillating within the double-digit threshold since February of 2016. It has oscillated between 13% and 18% and it’s still rising,” Adu said.

“And inflation has not gone or returned back to single-digit all through these tenures and still shows no sign of doing so in the near future,” he said.

“Does it mean that single digit is now a myth? Or is that Central Bank still hasn’t figured out how they used to do it before and how to get back there?” he added.

With the Monetary Policy Committee (MPC) meeting coming up next week, analysts have been posing the following questions to the CBN…will the upcoming MPC meeting be any different with regards inflation rate? Or would they continue to put their hands up in the air to inflation and allow it to continue to eat out the purchasing power of over 200 million Nigerians?

When the double-digit era began in 2016, the CBN kept its rates on hold as the economy plunged deeper into recession. Policymakers kept their benchmark rate steady at 14 percent, having hiked the rate back in July of the same year.

The decision came after the 2016 third-quarter growth figures indicated that growth had decelerated further, with GDP falling 2.24 percent compared to the same period in 2015. Within the same period, policymakers were battling the highest inflation rate recorded in the last decade which stood at 18.55 percent.

The MPC in the years that followed subsequently maintained the status quo. In the last 4 years, the MPC maintained the status quo 89.29% of the time.

Uche Uwaleke, a professor of finance and capital market and president of the Association of Capital Market Academics of Nigeria stated that despite the near-impossibility of the inflation rate to witness single-digit in the next 2 years, the MPC’s decision in their last meeting, however, was a wise one.

“Even though analysts anticipated the outcome of the last MPC meeting, this time more than ever, the decision was considered a prudent and wise move. However, achieving single digit remains a mirage amidst the myriad of challenges facing the Nigerian economy currently,” Uwaleke said.

Policymakers are currently trapped in a trilemma of macroeconomic choices in a period when Nigeria does not have the luxury of time.

With the 2023 general elections less than a year away, hopes of salvaging Nigeria from the clutches of double-digit inflation’s claws back to the warm embrace of single-digit could only be envisaged as a fairy-tale which can only be realized if the upcoming general elections tilt in favour of the anticipating but hopeful 200 million Nigerians who are ready to make a change.