Burdened consumers would have to continue to struggle for survival as Prices of goods and services continue to rise, with inflation rate for October reading at 33.88 percent, according to the nation’s Statistics Bureau, (NBS).
Also, the Central Bank’s financial policy may be at risk as prevailing high interest rates added to inflationary pressures could compound credit drought, and possible loan default that could increase non performing loans beyond the threshold of CBN, which is below five percent, analysts say.
Already some banks, suffering from higher defaults ocassioned by the fledging deregulation in the oil sector, are itching beyond the limit.
This is coming amid Credit ratings agency, Fitch, which recently projected that non-performing loans of Nigerian banks will increase in 2024 on the back of high interest rates and inflation in the country.
The agency stated this in its latest credit ratings report on Nigeria where it affirmed the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Positive Outlook.
According to the firm, the loan books of the banking sector at 35% of assets in the sector by the end of 2023 are low.
Similarly, the UN recently said that food insecurity in the country will rise as the number of hungry people in Nigeria to rise by 7million in 2025.
However, the Bureau, in its report released on Friday attributed the rise in inflation to increased transportation costs and higher food prices.
Nigeria’s headline inflation rate increased to 33.88% in October 2024, up from 32.7% in September 2024, reflecting a 1.18 percentage point month-on-month increase.
This was contained in the NBS Consumer Price Index (CPI) report released on Friday.
The Bureau attributed the rise in inflation to increased transportation costs and higher food prices.
But Fitch had stated that it , “ expects the banking sector’s regulatory non-performing loans (end-1Q24: 5.1%) to increase in 2024 due to high inflation and interest rates. However, loan books are small (end-2023: 35% of banking sector assets).”
The report further referenced the CBN’s increase in capital requirement for banks that is meant to be completed by the end of the first quarter of 2026 together with the amendment of the 2020 finance act which imposed a 70% windfall levy on banks’ foreign exchange gains in 2023 and Q1, 2024. It noted that these decisions will not lead to capital adequacy ratio breaches.
In fact, Fitch in the report noted that it expected the MPR to rise again in the last quarter of 2024, alongside the ongoing use of prudential and operational tools like open market operations, with rates set near the MPR, aimed at improving the effectiveness of monetary policy transmission after prolonged financial repression.
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Nigeria’s inflation rate rose to 32.7% in September, reversing a two-month slowdown since July 2024, driven by higher petrol prices that pushed up transport costs. Food inflation for the month increased to 37.77% year-on-year, marking a 7.13 percentage point rise from 30.64% in September 2023.
On a monthly basis, food inflation reached 2.64% in September 2024, up from 2.37% in August 2024, reflecting a 0.27% increase.
Indeed, under Yemi Cardoso, the CBN raised the monetary policy rate (MPR) five times in an effort to curb inflation and promote economic stability. The first increase moved the rate from 18.75% to 22.75%, followed by subsequent hikes to 24.75%, 26.25%, and 26.75%, with the most recent adjustment in September 2024 when the Monetary Policy Committee (MPC) raised it by 50 basis points to 27.25%.
These cumulative increases, totaling 850 basis points since Cardoso’s tenure began, aim to address Nigeria’s persistent inflation challenges, particularly in core and food inflation.
However, consumers are yet to benefit from the expected positive impact of the tight monetary policy measures , for which, analysts say, would require the full compliment of the fiscal policy measures.
However, the analysts say, the economy is currently in comatose, and possibly in an intensive care unit, with serious struggles between major political considerations and the need to muster the needed courage and political will for decisive approaches to issues affecting the economy.
