The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has explained that the uptick in Nigeria’s food inflation is due to the worsening security situation in many parts of the country.
He disclosed this while addressing the media after the meeting of the monetary policy committee on Tuesday, where the committee voted to retain the MPR at 11.5% and other parameters constant.
Godwin Emefiele stated that the increase in inflationary pressure is attributable to security challenges in the food-producing areas in Nigeria, where farmers face frequent attacks by herdsmen and bandits in their various farms.
According to data from the National Bureau of Statistics (NBS), Nigeria’s food inflation stood at 21.79% in February 2021, the highest rate recorded in over 15 years.
“This persisting uptick in food inflation, however, was the major driving factor to the uptick in headline inflation. This was due to the worsening security situation in many parts of the country, particularly, the food-producing areas, where farmers face frequent attacks by herdsmen and bandits in their farms.
While the Bank is intervening significantly in the agricultural sector, the rising insecurity in some food-producing areas is limiting the expected outcomes in terms of supply to the market, thus contributing to the rise in food prices. The Committee further noted that the key drivers of the increase in core inflation included, the hike in the price of Premium Motor Spirit (PMS), the upward adjustment in electricity tariffs, and the depreciation of the domestic currency (naira).” CBN MPC.
Soaring inflation despite CBN interventions
Despite the significant interventions made by the apex bank in the Agricultural sector, food prices are soaring and this is affecting the country’s headline inflation.
- According to the communique of the MPC meeting, the rising insecurity in some food-producing areas in Nigeria is limiting the expected outcomes in terms of supply to the market despite significant interventions in the agricultural sector, thus contributing to the rise in food prices.
- In terms of funding, the Committee noted that the CBN has disbursed funds under its various agricultural interventions towards improving food supply in Nigeria.
- The Committee noted the disbursement of N107.60 billion to 548,109 farmers cultivating 703,619 hectares of land between Q4 2020 and Q1 2021 to boost dry season output in support of agricultural value chain development.
- Total disbursements as of the end of February 2021 amounted to N1.487 trillion under the various agricultural programmes, of which N686.59 billion was disbursed under the Commercial Agricultural Credit Scheme (CACS).
- A sum of N601.75 billion was also disbursed under the Anchor Borrowers Programmes (ABP) to 3,038,649 farmers to support food supply and dampen inflationary pressures.
Notably, under the Targeted Credit Facility, the Bank has disbursed N218.16 billion to 475,376 beneficiaries, of which 34% of beneficiaries are SMEs. Under AGSMEIS, N111.62 billion has been disbursed to 28,961 beneficiaries, 70% of which are in the agricultural sector.
Why this matters
With Nigeria’s inflationary pressure on the increase and the CBN’s continued approach of holding the benchmark interest rate so as to stimulate the economy, improve productivity and create employment by means of continuous interventions to strategic sectors of the economy:
- the government and other security stakeholders need to step up efforts towards ensuring adequate security in the country, especially in food-producing areas, to stem the tide of rising food prices; and
- there is a need to focus more on the consolidation of the recovery process that started in 2020.