Falling food prices moderate inflation spike amid sustainability concerns

• Selling crude in naira a game-changer, says MPC member
• FG unveils joint committee on food security, inflation 
• Create enabling environment for businesses, Ohuabunwa, ICSP charge govt
 
Misalignment in Nigeria’s monetary and fiscal policies may keep the country’s economy on crutches despite the slight reduction in inflation figure for July to 33.19 per cent.

   
When placed with the development last year, Nigeria still needs to do a lot in bringing down the inflation rate as the month-on-month comparison with year-on-year data shows that the inflation rate was 9.32 per cent higher compared to July 2023, which was 24.08 per cent.  
   
The July month-on-month rate dropped 0.8 per cent, lower than the 34.19 per cent recorded in June 2024.  Most stakeholders who spoke with The Guardian yesterday expressed concern about the need to improve monetary and fiscal policies at a time when the manufacturing sector is on the verge of collapse.  
   
This drop is attributable to the reduction in food inflation, which has been the country’s chief driver of headline inflation. Food inflation month-on-month rates recorded a decline of 0.08 per cent, from 40.87 per cent in June to 39.53 per cent in July.  
   
The National Bureau of Statistics (NBS) report shows that the inflation rate is highest in Bauchi at 46.04 per cent, as against the June rate of 42.95 per cent and lowest in Benue at 27.28 per cent. It said food inflation is highest in Sokoto at 46.26 per cent and lowest in Adawama at 33.48 per cent. Urban inflation is 35.77 per cent against June figures of 36.55 per cent and rural inflation is 31.26 per cent as against the June rate of 31.09 per cent.
   
This is cheering news, given the pains Nigerians have been going through due to the high cost of living since the inception of the Tinubu administration in May 2023.
   
The high inflationary rate, combined with fluctuations in the naira’s exchange rate, has taken a devastating toll on the economy, resulting in businesses shutting down and families unable to meet their household needs.
   
The government has been fighting frantically to stimulate the economy and bring down inflation, but the efforts have yet to yield the desired results. The Central Bank of Nigeria (CBN) engaged in a bullish monetary policy tightening spree. In his first Monetary Policy Committee (MPC) meeting on assumption into office, Governor Yemi Cardoso increased the interest rate by 600 basis points from 18.75 per cent to 22.75 per cent.  
   
This was followed by another 200 basis points hike and a further 150 basis point increase to 26.25 per cent. The apex bank also increased the Cash Reserve Ratio (CRR) of banks to 45 per cent, one of the highest in the world.  
   
A member of the MPC, Aloysius Uche Ordu, said in Abuja that the monetary policy measures taken thus far are severely hemmed in by fiscal stresses, making it difficult for monetary policy to do its job. 
   
The financial expert observed that monetary policy needs much more help from fiscal and structural policies. He said: “In this regard, the government’s recent mandate that the Nigerian National Petroleum Company Limited (NNPCL) should sell 450,000 barrels of crude oil per day directly to the Dangote and other local refineries, is a welcome development, estimated to save over $7 billion in foreign exchange.”
   
He noted that with tax revenues constituting less than eight per cent of GDP, Nigeria urgently needs to fix the structural weaknesses of its tax system.  
   
“It matters that fiscal expectations are anchored. Indeed, our ability to control inflation and influence real economic activity rests fundamentally on fiscal behaviour and Nigerians’ expectations of appropriate fiscal behaviour. Otherwise, the task of monetary policy in controlling inflation and stabilising real economic activity is much more difficult,” said Ordu.  An economist, Kelvin Emmanuel, said the new inflation figures show that the upward price movement may have peaked.  
   
“I think inflation has peaked, and the impact of the 150-day waiver on specific food item imports will begin to kick in from the September reading. I, however, do not believe that the MPC will cut rates at their next meeting; they will hold and wait to see if this drop is sustained at the September CPI calculation,” Emmanuel explained.
   
With food inflation at 39.53 per cent as against 40.87 per cent recorded in June 2024, and toeing the same line of thought as Ordu, Emmanuel admonished the fiscal authority to focus on its open money market instruments to reduce the money supply, guarantee energy security, and provide levers required to reduce the cost of primary food production as a tool to ensure the trend is sustained.
   
Reacting to the drop in inflation, Prof. Uche Uwaleke of Nasarawa State University, Keffi, said the easing in the headline inflation rate is due chiefly to the moderation in food inflation occasioned by the harvest season.
   
He said the drought reported in many parts of the North partly explains the high food inflation rate in states like Sokoto, 46.26 per cent, and Jigawa, 46.05 per cent. He added that it is instructive to note that the rural inflation rate increased in July.
   
“It is time for the CBN to recognise the real pressure points and shift some attention to how the fiscal authorities can be supported to boost food production beginning with a halt in MPR hike next month,” he said.
   
In his reaction, the Lead Director of the Centre for Social Justice (CSJ), Eze Onyekpere, said it is not yet Uhuru. He noted: “It is too early in the day to predict that the rate will continually move downward. It is just a paltry 0.8 per cent drop. Of course, the rate would not have perpetually continued on the upward swing.”
   
He said it is expected that as the harvest season sets in and new food enters the market, food inflation will drop. “It is important for the MPC to understand that this slight drop is not the evidence for more increase in the MPR and the CRR at their next meeting.”
   
For the National President of the All Farmers Association of Nigeria (AFAN), Kabir Ibrahim, the transparent implementation of a duty-free importation window will surely lower the cost of food before harvesting takes full swing.
   
He said, “Let’s monitor the duty-free import window by making it transparent and devoid of corruption. It will bring down inflation before harvest season begins in earnest. However, we must incentivise smallholder farmers to scale their productivity for sustainability.”
   
Experts insisted that President Bola Tinubu’s intention of keeping inflation low must be led by boosting oil production, addressing host communities’ grievances in the above and barring the NNPCL from 100 per cent of eight OMLs for which it has zero plan and little liquidity to develop them.  
   
Oil Mining License (OML) 11 is operated by the Nigerian Petroleum Development Company (NPDC). It stretches from Owaza in Ukwa West Local Council of Abia State to Asa-Ndoki in Oyigbo Local Council of Rivers State, down to Eleme, Tai, Khana, Gokana, and Bonny Local Council in Rivers State, and contains Oza and Asaramatou fields. 
   
Some have considered OML 11 to be NNPC’s most valuable asset.  

RELATEDLY, the Federal Government said it has set up an Agriculture and Water Resources Joint Action Committee to address the challenges of food security and inflation.
   
The Minister of State for Agriculture, Aliyu Abdullahi, disclosed this at yesterday’s National Youth Convention in Abuja. The convention was organised by the Nigerian Women for Agricultural Progress and Development Initiative. Abdullahi said the initiative was geared towards advancing President Bola Tinubu’s food security agenda.He said the ministry had commenced dry-seeding farming as the country would be unable to feed its more than 200 million people if it depended on a six-month rainy season for agriculture.
   
The partnership, according to him, is to encourage all-year-round farming. He said: “We have approved the Agriculture and Water Resource Joint Action Committee, which will examine food security to enable us to take on dry-season farming in most of the river basins.

   
“We plan to see how both ministries can collaborate with the River Basin Development Authorities, integrating agricultural experts to enhance farmer livelihoods, increase production and incentivise youth and private sector participation.”
   
MEANWHILE, Sam Ohuabunwa, the former CEO of Neimeth Pharmaceuticals, and Arthur Ozoibo, the President of the Institute of Certified Sales Professionals (ICSP), have appealed to the Federal Government to create an enabling atmosphere for businesses to thrive.
   
This, they noted, would help address the country’s socio-economic crisis.  They spoke at a breakfast meeting with fellows and members of the ICSP in Ikeja, Lagos.
   
Ohuabunwa, who is also a former Chairman of the National Economic Summit Group (NESG), said it is in the government’s interest to support businesses and help them thrive, as society would be better off for it.
   
Ohuabunwa, who spoke on ‘Overcoming the challenges of a price-quality conundrum in a period of acute cost instability’, noted that if businesses flourish, economic activities would pick up, poverty would reduce, and most of the challenges confronting the country would ease off.
   
According to him, the country’s socio-economic crisis can be resolved if the government encourages business owners through its policies. Ozoibo, for his part, said: “Cost can be high, exchange rate can be high, but if it is stable, it will help business people plan. When they plan, they know how to mitigate certain things to ensure that the products are still affordable. But with instability, one is not even sure where the government is going. It makes it difficult for businesses to plan, creating fears and making things difficult for salespeople.”