CBN Says Inflation To Drop In Q1, Laments Impact Of Insecurity On Food Supply
With the ongoing harvest season in the country, the monetary policy committee of the Central Bank of Nigeria (CBN) has projected that inflation would drop in the First Quarter of 2022.
Price of food items soared from 2020 through 2021 owing to the lockdown occasioned by the Covid pandemic and insecurity that forced farmers to stay off farmlands.
The MPC noted that the consumer price index (CPI) which measures inflation would decline because
food harvests is expected to
progress towards the end of the first quarter of 2022.
Across the country, starting in October in the northern areas and later in the southern areas, the main harvest is starting normally in October for most crops and sorghum a long cycle crop will be harvested during December/January normally.
The inflation rate jumped to 15.63 percent in December 2021 from 15.40 percent in November, having experienced an eight consecutive months decline between April and November 2021.
Rising from its Monetary Policy Committee meeting that ended Tuesday in Abuja, the committee noted that the
economic recovery is therefore expected to progress gradually with the ongoing support by the monetary and fiscal authorities.
The MPC projects output growth at 3.10 per cent in 2021 with an expected better outcome in 2022, consistent with the expected improved macroeconomic performance. The economic recovery is therefore expected to progress gradually with the ongoing support by the monetary and fiscal authorities, progress in COVID-19 vaccinations and continued high crude oil
prices.
“After a moderate increase in December 2021, headline inflation is expected to trend marginally upwards in the short-term before moderating towards the end
of the first quarter of 2022. This is expected as food harvests progress towards the end of the first quarter of 2022 and improve food supply. In general, with
the Bank sustaining its intervention programmes through the year, food inflation is expected to trend downwards in 2022.”
According to the MPC, “forecasts for key macroeconomic variables for the Nigerian economy, indicated expected rebound in output growth for most of 2022, sustained by ongoing broad monetary and fiscal stimuli. Accordingly, the Nigerian economy is forecast to grow in 2022 by 2.86 per cent (CBN), 4.20 per cent (FGN) and 2.76 per cent (IMF).
However, the MPC expressed concerns over the impact of insecurity on food supply.
“On price development, Members continued to express concerns about the impact of insecurity in farming communities on food inflation. Whereas headline
inflation had been moderating for several months, the committee believed that its recent uptick was associated with increased demand during the festive
season and was thus of the view that prices will return to the downward trajectory given the Bank’s ongoing interventions in the agriculture sector.
On
this note, Members applauded the efforts of the Bank with the recent launch of the rice pyramids, noting that these efforts to increase food supply and stem food inflation were in the right direction.
Members, however, reiterated the key role of the Federal Government in providing the necessary security around the country, and particularly in the farming communities, to ensure that farmers and
their produce remain safe, and food supply is both boosted and uninterrupted.”
The Committee noted that the ongoing dry season farming would further improve food supply and dampen prices.
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