Improved security could bolster agricultural output, ease food inflation – Cardoso

Improved security in Nigeria’s North–east could drive agricultural output and help alleviate food inflation, Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has said.

Speaking after the Monetary Policy Committee (MPC) meeting of the CBN in Abuja on Tuesday, Mr Cardoso highlighted the potential for increased productivity in the agricultural sector due to enhanced security efforts, which have created a more conducive environment for farming activities.

“While food prices remain a key contributor to the uptick, members commended the efforts of the Federal Government for the improved security, especially in the North–east of the country, which would likely improve food production,” Mr Cardoso said.

“The Committee also noted the role of rising energy prices on the general price level due to its impact on factors of production. The recent increase in the price of Premium Motor Spirit (PMS) has also impacted the cost of production and distribution of food items and manufactured goods.”

According to the National Bureau of Statistics, food inflation surged to 39.16 per cent year-on-year in October, up from 37.77 per cent in September, contributing significantly to the overall inflation rate of 33.88 per cent. Month-on-month, food inflation rose to 2.64 per cent from 2.52 per cent, underscoring persistent price pressures on households and businesses.

In response, the MPC opted for a further tightening of monetary policy, raising the benchmark Monetary Policy Rate (MPR) by 25 basis points to 27.5 per cent.

While acknowledging the negative impact of rising energy costs on production and distribution, the committee expressed optimism about the potential stabilising effects of the full deregulation of the petroleum downstream sector.

Mr Cardoso noted that deregulation could reduce scarcity and stabilise prices in the medium term.

The MPC also commended recent gains in Nigeria’s external sector, including an increase in the current account surplus and enhanced foreign exchange inflows, which have marginally boosted external reserves to $40.88 billion as of November 21.

However, concerns persist over exchange rate pressures driven by high demand.

Despite inflationary challenges, the MPC emphasised the resilience of Nigeria’s financial system, pointing to strong indicators such as a healthy Capital Adequacy Ratio, a low Non-Performing Loan ratio, and stable liquidity levels.

The committee urged the CBN to maintain vigilant oversight to ensure continued compliance with regulatory thresholds.

Members reaffirmed the need for deeper collaboration between fiscal and monetary authorities to stabilise prices and anchor inflation expectations. They also called for sustained efforts to boost financial inclusion, enhancing the effectiveness of monetary policy transmission.

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Food inflation

Inflation continues to erode purchasing power in Nigeria, with soaring food and energy costs driving widespread concern.

The nation has faced a relentless rise in food prices, exacerbated in 2023 by President Bola Tinubu’s removal of petrol subsidies and the adoption of a floating exchange rate for the naira. These policies have sharply increased the cost of essential goods, deepening poverty and worsening food insecurity for millions of Nigerians.

The challenges extend beyond consumers. Rising costs, insecurity, and erratic weather patterns have forced numerous farms and businesses to shut down or scale back operations over the past year, further straining food supply chains.

In July 2023, President Tinubu declared a state of emergency on food security, announcing measures such as the suspension of duties, tariffs, and taxes on key food imports, including beans, wheat, and husked brown rice. While these interventions aimed to rein in skyrocketing prices, their impact has been limited, and food inflation remains stubbornly high.