Business
Rising inflation: MPC meeting to hold next week amid calls for caution
The Central Bank of Nigeria (CBN) has issued a notice of a Monetary Policy Meeting (MPC) to further decide on measures to tackle the country’s rising inflation and economic hardship.
This comes as the country’s headline and food inflation rose for the 19th time to 34.19 percent and 40.87 percent respectively in June 2024, according to the National Bureau of Statistics (NBS).
According to the notice released on the apex bank’s website on Tuesday said that July’s meeting is scheduled for Monday, July 22 to Tuesday, July 23.
This would be the bank’s 296th MPC and fourth since the appointment of its governor, Olayemi Cardoso in September 2023.
Recall that the MPC had continued its tightening measures which saw the country’s interest rise to 26.25 percent in May from 18.75 percent in May 2023.
The CBN had insisted on an interest rate hike despite calls by stakeholders within the financial sector for a break.
Reacting to the latest inflation figures, David Adonri, Analyst and Executive Vice Chairman at Highcap Securities Limited, said : “Despite all the measures taken by CBN, inflation rate continues to rise. Continued application of monetary policy to tackle this kind of stubborn inflation is failing because what is required is not demand management but supply side fiscal policy.
“Should the monetary authority react by hiking interest rate again, it will further increase yield on debt and cause financial assets to migrate more to debt. This may harm ongoing recapitalization exercise of banks. Rising inflation is not good news for equities.”
Commenting on the further rise in inflation, analysts at Comercio Partners said: “Looking ahead, food inflation, the main driver, is expected to taper off because of the short-term federal government’s recent interventions, with a N2 trillion packages announced by Abubakar Kyari, the minister for Agriculture and Food Security, to curb rising prices and speed up stabilization and growth.
“Also, a 150-day duty-free import window has been approved, allowing tariff-free importation of maize, husked brown rice, wheat, and cowpeas through land and sea borders. This measure, with imported commodities subject to a Recommended Retail Price (RRP), aims to provide immediate relief.
“However, tackling food inflation long-term means addressing underlying issues like transportation and logistics challenges, harvest losses, and regional insecurity. Moreover, discussions around raising the minimum wage could further fuel inflationary pressures.
“On the monetary front, recent interest rate hikes have helped combat inflation, but another hike seems unlikely because of tight macroeconomic environment.
“However, a focus should shift towards addressing the root causes of inflation without stifling economic growth.”
Also commenting, analysts at CardinalStone Finance stated: “The June CPI data indicated that inflation leapt by 24 bases points (bps) to 34.2% YoY, missing analysts’ average consensus of 33.94% and our projection of 33.90%. “Our tamer inflation expectation, based on the stability in the foreign exchange (FX) market was overshadowed by a more pronounced food inflation.
“We perceive that the food basket is still grappling with an uptick in input costs and persisting insecurities in the review period, thus propping up prices.