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Tuesday, December 7, 2021

CBN monetarists decried effects of inflation on standard of living

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By Oludare Mayowa

The Central Bank of Nigeria (CBN) monetarists have decried the prevailing inflation rate in the economy and described it as ‘unacceptably high’ and putting pressures on interest rate and negatively impacting standard of living.

According to Adeola Adenikinju, member of the Monetary Policy Committee (MPC), the current inflation rate is putting pressures on domestic interest rates and affecting standard of living of Nigerians and attributed the trend to growing insecurity in the country.

In his personal note at the last MPC meeting, Adenikinju urged the CBN to continue “to use the various administrative tools at its disposal to control excess liquidity in the system.”

He said economic recovery rate is still very weak and fragile, while poverty and unemployment rates are still quite high.

“The security situation in the country is hurting economic recovery, while at the same time, poverty and unemployment also contributes to the worsening security challenge we have.

“As we enter another planting season, the effect of climate change
may have negative impacts on food prices in later part of the year.

“The current efforts of the CBN to promote dry season agriculture would be
quite helpful,” Adenikinju said.

However, another member of the MPC, Mike Obadan blamed the rising food prices in the country on the activities of middle men and women including market unions and associations.

READ ALSO: Nigeria, Ghana, 2 others want IMF to invest $30 bln of SDRs in Africa to battle effects of COVID

Obadan said the role of market unions/associations “has become pervasive with their pricing characterised by monopoly/oligopoly practices and arbitrariness.

He said the market is being manipulated in a brazen manner by distributors and retailers to hike prices with impunity.

“Such prices do not reflect market conditions. There is thus the need to monitor their activities to ensure that competitive prices prevail and there is no unbridled exploitation of consumers.

“If the Government cannot go into price regulation, moral suasion will at least demonstrate its awareness of the problem and could be helpful,” Obadan wrote in his personal note at the last MPC meetin.

He said as a basis for improved growth and price deceleration, there is need to ensure stability of the exchange rate.

“But for the fact that agriculture is resilient, the marginal reduction in food inflation would not have been possible in a season which is far from harvest.

“Therefore, while what the government is doing in fighting insecurity is highly appreciated, it is crucial that it does not relent in efforts to ensure security in the country, especially in all the food producing areas,” Obadan said.

On her part, Aishah Ahmad, deputy governor and member of the MPC expressed otpimism that decline in inflation rate which started in April and May will be sustained.

Nigeria inflation declined to 17.93 percent in May from 18.12 percent in April, according to data released by the Nigerian Bureau of Statistics (NBS).

Ahmad said it is expected that deceleration in the rate of inflation will continue as positive impact of government’s investment in the agriculture and manufacturing sectors continue to manifest through increased output and product supply in the market.

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