With the aftermath of the Federal Government’s naira redesign policy, the National Bureau of Statistics (NBS) has reported that Nigeria’s inflation rate climbed to a 17-year-high rate of 21.91 percent year-on-year in February 2023. The figure is a 0.09 percent increase compared to 21.82 percent in January 2023. The NBS disclosed this in its Consumer Price Index (CPI) report published on its website on March 15, 2023. The increase in rising figures is fueled by the new naira note scarcity and uncertainties relating to the presidential election.
The NBS disclosed that the food inflation rate, which is a significant factor in overall figures, rose to 24.35 percent year-on-year in February 2023. This represents a 7.24 percent rise from the 17.11 percent rate recorded in February 2022. The NBS also added in the report that the surge in food prices resulted from elevated prices of different food items. These include oil and fat, bread and cereals, potatoes, yam and other tubers, fish, fruits, meat, vegetables, and other food products.
Electronic transactions contribute to rising costs.
After the new naira redesign policy kicked off in earnest in January 2023, the public resorted to using electronic means of payments, such as POS and transfer, though this came into effect slowly. People were reluctant in adopting it because of the difficulties that come with using it. Some market men and women are not technologically savvy, so they may not know how to verify that money has been sent to their account. Many of them do not even have a bank account.
Those who have bank accounts have to deal with delay in being alerted by the bank and charges. Because of this, traders at varying levels adopted a unanimous principle of asking that their customers add whatever charges that the bank would deduct from them. Also, where cash is really scarce, the few who support electronic means of payment exploit the situation by virtue of allowing the customers to make electronic transfers to them.
Rise in costs causing headaches for the CBN in the coming weeks or months.
The inflation figures are expected to feature prominently in the upcoming meeting of the Central Bank of Nigeria (CBN)’s Monetary Policy Committee, which is scheduled for March 20, and March 21, 2023. In its defense of the naira redesign policy, the CBN said it is expected to control the inflation in the market as less cash in people’s hands reduces currency outside banks and money circulation. The governor of CBN, Godwin Emefiele, reiterated that the accompanying decline in the money supply would slow the pace.
He further stated that the country has started to see inflation trending downwards following general price stability in almost all market genres, including for goods and financial products. With the latest figure showing the opposite of CBN’s promise and the supreme court judgment cancelling the policy, the CBN will now need to devise a strategy to address the inflation challenge. It is expected that the CBN will decide on the cost of loans as its next move to fight these increases.
CBN governor lifts the ban on spending old notes.
Meanwhile, Mr. Emefiele in a press conference has lifted the ban on transacting with old 500 and 1000 naira notes as a legal tender in the country. The new policy is that these old notes are legally acceptable until December 31, 2023. As these old notes are released back into circulation, the exorbitant charges by POS vendors and market people will significantly reduce because more people now have access to cash. Hopefully, this also helps in reducing the inflation on food items in the market.
National Bureau of Statistics: Website