Nigeria's rising inflation conforms to global trend – Emefiele

Mr. Godwin Emefiele, Governor, Central Bank of Nigeria (CBN), said on Friday that the steady increase in headline inflation from 15.60 percent in January to 20.77 percent in September was consistent with global trends.

Emefiele said this at the 57th Annual Bankers Dinner, organized by the Chartered Institute of Bankers of Nigeria (CIBN) on Friday in Lagos.

The theme of the dinner, "Radical Responses to Abnormal Episodes: Time for Innovative Decision-Making," was appropriate and well timed.

He also said headline inflation soared to 20.77 per cent in September, indicating eight consecutive months of uptick, and that the upward momentum was after a successive period of decline in 2021, due to balanced monetary policy actions.

He said upside pressure on consumer inflation re-emerged during the year as global conditions complicated existing local imbalances and undermined price stability.

"Food remains the major component of the domestic consumer price basket. The annualized uptick in headline inflation mirrors the 6.21 percentage point surge in food inflation to 23.34 percent in September.

"During this period, core inflation also resumed an upward movement from 13.87 percent in January to 17.60 percent."

"In addition to harsh global spillovers, exchange rate adjustments, and imported inflation, inflation was also driven by local factors such as farmer-herder clashes in parts of the food belt region," he said.

Emefiele said during the early part of 2020, the world economy experienced the most significant downturn last witnessed since the Great Depression following the outbreak of the COVID-19 pandemic.

He said the effect contracted global GDP by about 3.1 percent in 2020, and commodity prices went into a state of turmoil as the price of crude oil plunged by over 70 percent.

He said as the world struggled to recover to pre-pandemic conditions, the global economy was yet again hit by another adverse occurrence with the eruption of the Russian-Ukraine war.

He said the war, along with the sanctions placed on Russia by the US and its allies, led to a spike in crude oil prices.

He said in the attempt to contain rising inflation, advanced markets such as the US, began to increase their policy rates, which led to a tightening of global financial market conditions along with a significant outflow of funds from emerging markets.

"The subsequent strengthening of the US dollar further aggravated inflationary pressures, along with a weakening of currencies and the depletion of external reserves in many emerging market countries."

"Today, close to 80 percent of countries have reported heightened inflationary pressures due to a confluence of some of the factors mentioned above," said Emefiele.

He explained that central banks in emerging markets and developing economies were also compelled to raise rates in a bid to contain rising inflation, which was expected to lead to a tapering of global growth over the next year.

"In fact, the short-term global growth projections by the IMF have been downgraded three times in 2022 and are likely to be below the 3.2 percent and 2.7 percent estimates for 2022 and 2023, respectively.

"Average growth among advanced economies is projected to plunge from 5.2 percent in 2021 to 2.4 percent in 2022 and 1.1 percent in 2023." "Estimated output growth in emerging markets is expected to slow from 6.6 percent in 2021 to 3.7 percent apiece in 2022 and 2023," he said.

He said in view of the food, energy, and cost-of-living crises in many countries, there were growing restrictions on food exports from many countries.

"As of the last count, according to the World Bank, about 23 countries, mainly in advanced economies, have banned the export of 33 food items. "Seven other countries have additionally implemented various measures to limit food exports," said Emefiele.

On currency redesign, Emefiele said, "Analysis of the key challenges primarily indicated a significant hoarding of banknotes, as over 85 percent of the currency in circulation were held outside the banking system."

"This is even as the amount of currency in circulation has more than doubled from N1.46 trillion in December 2015 to N3.23 trillion in September 2022—a worrisome trend that must be curbed."

He, therefore, said the policy would quicken the attainment of a cashless economy as it was complemented by increased minting of the eNaira.

According to him, the redesigned notes will also curtail currency outside the banking system, and as the monetary policy becomes more effective, it will help rein in inflation.

Earlier, Dr. Ken Opara, CIBN president, commended Emefiele, saying he had continued to be purposeful in curtaining economic shocks from the aftermath of the fourth wave of the COVID-19 pandemic.

He commended him for keeping inflation and other related economy indices, especially the naira, from distortions exacerbated by declining production levels fueled by high cost of production, insecurity, dwindling government revenues, foreign exchange volatility and uncertainty in the global oil market.

Opara said, "Through the careful management of the monetary policy rate (MPR), the CBN continued to drive the recovery path of the Nigerian economy through the expansion of credit to the real sector, guided management of foreign reserves, and promoting a sound financial environment and monetary policy."

The Annual Bankers' Dinner is a platform where stakeholders of the banking community gather to reflect on the developments in the banking industry and economy over the past year while gaining economic insights for the year to come.