- The inflation we are witnessing today is structural in nature and is largely driven by food inflation.
- Banks are presently enjoying some level of tale-wind effects despite the difficulty in the economy.
- The banks have seen a lot of pivoting away from over-the-counter to electronic payment systems which give them more revenue.
The Managing Director, of Cowry Asset Management Limited, Mr. Johnson Chukwu has said that the inflation pressures the country is currently facing are beyond what could be fought with the Central Bank of Nigeria’s conventional monetary policy tools.
Chukwu stated this while reacting to questions at an Arise TV interview about the rising inflation rate and the efforts by the CBN in tackling the monetary policy tools.
Inflationary pressure: He noted that interestingly the CBN has deployed almost all the tools at their deposal to fight inflation but it still persists.
- “The inflation we are witnessing today is structural in nature, and is largely driven by food inflation, apart from food inflation we have seen higher increases in fuel and other energy inputs and these are factors that are coming from the fact that we don’t have enough foreign exchange and then we are seeing a depreciation in local currency.
- The inflation pressures we are facing today are beyond what we can ordinarily fight with conventional monetary policy tools. So we are going to live with it for some time. I was actually thinking that we should see some moderation because of the impact of the cashless policy of the CBN. Maybe we are witnessing a lag effect; probably we may see a slowdown of inflation when March inflation is published,” he said.
State of the banking sector: On the state of the banking sector in the inflationary environment Chukwu said that banks are presently enjoying some level of tale-wind effects despite the difficulty in the economy.
- “In the first place, if you look at interest rate hikes, you see banks increasing their lending rate in the past couple of months whereas they have not been able to increase deposit rate, so the banks are enjoying an increase in net interest margin and we should expect this to reflect in their profitability,” he said.
Electronic payment: He noted that the banks have also seen a lot of pivoting away from over-the-counter to electronic payment systems which give them a higher level of revenue in terms of commission.
- “Why because if the banks do not have to deploy the same level of human resources they need to do if they have to serve the customers over the counter, they are enjoying an increase in non-interest income in terms of commissions and fees.
- They have to enjoy higher interest margins because the lending rate has gone up without an increase in the deposit ratio. So I will expect that the banks will come out with some level of improvement in their earnings and most especially improvement in the bottom line of their profit level,” he said.
What you should know: The headline inflation rate rose to 21.91% in February 2023 compared to 21.82% recorded in the preceding month of January.
The National Bureau of Statistics (NBS), which released the data on Wednesday said looking at the trend, the February 2023 inflation rate showed an increase of 0.09% points when compared to January 2023 headline inflation rate.
Similarly, on a year-on-year basis, the headline inflation rate was 6.21% points higher compared to the rate recorded in February 2022, which was 15.70%.
This shows that the headline inflation rate, year-on-year basis, increased in February 2023 when compared to the same month in the preceding year of February 2022.
According to the NBS, on a month-on-month basis, the percentage change in the All-Items Index in February 2023 was 1.71%, which was 0.16% points lower than the 1.87% recorded in January 2023.
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