Although inflation is currently a global issue, Nigeria’s experience in the first half of the Year 2022 is however worrisome, climbing month on month and indicative of a close to recession, the analysts say.
In January, inflation peaked at 15.60 per cent, it shot up to 15.70 per cent in February and, 15.92 per cent in March.
This implies a N5.71 or 1.34 per cent devaluation from N424.62 posted in the previous market session on Thursday.
According to Emefiele, the Monetary policy Committee members decided to further increase it by 100 basis points after similar exercise in May by 150 basis points to checkmate the disturbing inflationary pressures.
This is because inflation is being driven by a combination of factors, mainly the surge in the price of diesel and other Petroleum products.
Diesel is a major fuel for powering generators and food delivery trucks. In addition to energy costs is the falling value of the naira in the forex market.
There has been a general increase in prices the world over. The response so far has been a tightening of monetary policy in most countries.
Bismarck Rewane, chief executive of the Financial Derivatives Company had predicted this in the latest Economic Bulletin.
“The Central bank is widely expected to hike interest rates at its next policy meeting scheduled for July 18 & 19. This would be in line with international trends and align with the CBN’s mandate to fight inflation, ” Rewane made the prediction last week.
But professor Ken Ife, an economist believes that there is no quick fix to economic problems, but deliberate action by the government and its agencies.
According to Ife, who appeared on the Channels Television, Sunrise, Tuesday, the fact that the core inflation has been on the rise shows that there is need for more investments in infrastructure and Petroleum products like diesel to reduce cost of transportation.
He blamed government for wasting millions of dollars in maintenance of the moribund refineries, but that such huge amount should be diverted to building of modular refineries.
The professor says current happening provides auspicious opportunity for Nigeria to shift to gas to accelerate development.
Paul Alaje, senior economist, SPM Professionals says the cost induced inflation is encouraged by massive importation, adding, ‘It’s beyond the MPC.’
Alaje, who also spoke on Channels Television, Sunrise program Tuesday, said the fight needs collaboration among the three government agencies.
He says it does not make economic sense for government to be wasting billions of naira on refineries in payment of salaries and maintenance when neither the refineries nor the staff are doing anything.
He said while CBN is exploring monetary policy measures to curtail inflation, the fiscal aspect by the federal ministry of finance has to be monitored and controlled to avoid distortions.
Also, federal ministry of trade and investments should promote exports as well rather than concentrating only on import substitution strategy when nothing is being manufactured.
There is need for the country to produce and the ministry should be able to monitor the country’s trade balances with other for necessary action.