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How CBN Monetary Policy Committee Members See Inflation Fight Unfolding

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The Monetary Policy Committee (MPC) held its first statutory meeting for the year 2021 on the 25th and 26th January on the backdrop of dampened optimism for improvement in global output recovery, associated with the resurgence of the COVID-19 pandemic and mild success with vaccinations across several countries.

The Committee reviewed the developments in the global and domestic economic and financial environments in 2020 and the outlook for 2021 as well as the risks to this outlook.

Ten (10) members of the Committee were in attendance. MoneyCentral took a look at their various relevant statements on year-on-year headline inflation which hit a seventeen month high of 16.47 percent in January 2021.

Adamu, Edward Lametek

Inflation beyond a certain threshold can undermine the output recovery gains. Yet, to effectively address inflation, its origin and character must be well understood.

Among others, what can be seen is the dominant influence of high production cost and distribution bottlenecks in the current inflation dynamics. Of course, the effect of the easy stance of monetary policy cannot be completely discounted.

However, given that food prices have remained the major driver of the overall domestic price pressure, the role of money can be assumed to be minimal. As such, the correct policy-mix must continue to include a focus on alleviating supply from both production and distribution sides.

Adenikinju, Adeola Festus

Nigeria’s inflation problem is not just monetary but also has significant supply and structural components.

Undue focus on monetary instruments to control inflation of the sort in the country could backfire and make the economy reach an inferior equilibrium output level.

Ahmad, Aishah N.

It is pertinent to note that month-on-month growth in headline inflation was flat at 1.6 percent between October and December 2020, further supporting hopes that the upward trend in domestic prices may dissipate in the near term.

This optimism is also strengthened by the recent reopening of the land borders which should temporarily mitigate the current supply gap.

Over the long term, planned repositioning of the Nigeria Commodity Exchange should address structural issues within the agricultural and commodity trading value chains, with positive impact on food prices and foreign exchange earnings.

Aliyu, Ahmed

The rising inflationary pressure raises serious concerns in a banking system that seems to have excess liquidity.

I would not subscribe to hiking policy rate at this time of output slack. Rather, to curtail liquidity pressures, the Bank should employ its other potent liquidity management tools more aggressively to bring system liquidity under control.

Asogwa, Robert Chikwendu

The inflation rate has been adverse for several months and may likely continue on this upward trajectory for the time being but thereafter, it is expected to reverse and begin to decrease gradually.

Breaking the inflation spiral being partly fueled by supply chain disruptions will be dependent on consistency with supply management strategies including Central Bank’s targeted interventions to address some factors limiting food production in Nigeria.

Obadan, Mike Idiahi

The most worrisome development in the economy today is the accelerating inflation in a period of recession. Inflationary pressure has persisted. All the three measures of inflation – headline, food and core – have trended upwards consistently for quite some time now.

What is responsible for the accelerating inflation? Is it monetary expansion or other factors or both? Some analysts are of the view that the current inflation is the result of rapid monetary expansion.

I do not share this view. Yes, there is a perspective in the economics literature that inflation is everywhere a monetary phenomenon, that is, inflation is primarily caused by monetary expansion. The validity of this in all circumstances is very much in doubt.

The view may hold true in the advanced countries with well-developed production structures, high level of productivity, high consumer and aggregate demand, low level of unemployment.

In such countries, monetary expansion buoyed by high aggregate demand could result in monetary inflation. One thing though is that expansion of money supply does not automatically translate to inflation. There has to be increased aggregate demand in relation to credit expansion under conditions of full or near full employment output.

Importantly, considering the present state of the economy, increases in money supply do not automatically translate to price increases because of the following: recession (contraction of output and low economic activities), very high national rate of unemployment and underemployment at 27.1 and 28.5 percent, respectively, as at the second quarter of 2020, widening negative output gap (resulting from lull in economic activities and increased under-utilised capacity in the economy; high unemployment rate, supply shocks, decline in aggregate demand, infrastructure and security challenge), weak aggregate demand resulting from declining disposable income and rising inflation.

Thus, there seems to be no one-to-one correspondence between money supply and inflation in Nigeria. Under these circumstances, the drivers of headline, food and core inflation must be located elsewhere. In this direction, structural and other factors are key drivers.

They include: supply chain disruptions resulting from the covid-19 containment measures, insecurity in the food producing areas of the country, land border closures till last December, deregulation of the downstream oil sector leading to hikes in petroleum product prices, upward adjustment in electricity tariffs, upward adjustment of the exchange rate and the strong pass-through effect of import prices to domestic prices, and the legacy infrastructural deficits which have created serious logistics problems in the rural farming communities.

Obiora, Kingsley Isitua


Inflation pressure has persisted…and is at its highest level since December 2017.

The upward pressure has been largely driven by food inflation, which rose to 19.56 percent in December 2020 from 18.30 percent in November 2020.

This appears to be attributable to structural factors arising from disruptions to supply chains, insecurity in food producing areas of the country, infrastructural deficiencies and increases in both the pump price of Premium Motor Spirit (PMS) and electricity tariffs.

Such inflationary pressures emphasize the critical 44 Classified as Confidential importance of the CBN’s interventions to boost food supply, as well as ongoing efforts to crowd in private sector funding to alleviate the country’s large infrastructure gap.

Sanusi, Aliyu Rafindadi

Although evidence suggests that inflation may continue to rise, I believe focusing on recovery from the current recession should continue to be a more pressing objective of monetary policy.

Raising output, rather than tightening the policy stance, could be a means of reducing the inflationary pressure, which stems mostly from the supply-side.

Shonubi, Folashodun A.

Current inflationary pressures are attributed to non-monetary factors driving, particularly, food inflation.

I strongly believe that an efficient rail system remains one of the enduring solutions to the logistic bottlenecks impeding movement of farm produce and fueling food inflation.

In the short-term, however, a Public Private Partnership model to immediately address the logistics challenges may provide a quick win.

The Federal Government must also adopt more ingenious and practical approaches to resolving the insecurity challenges that are affecting food supply.

Emefiele Godwin, I

The rise in inflation along with the need to implement growth enhancing measures that would enable the Nigerian economy to emerge from the recession, continues to pose a dilemma for policy making authorities.

Given the fact that the rise in inflation has been due to cost-push factors rather than demand pull factors, the Monetary Policy Committee has placed greater weight on utilizing tools that would strengthen our productive base as a nation.

These measures such as the intervention programs being implemented by the Central Bank of Nigeria, will help to improve output, by enabling improved production of staple food items, which would ultimately help to support lower food prices and a more favorable outlook for food inflation.

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