Emefiele Downplays FX Scarcity, Says Insecurity Drives Inflation
Godwin Emefiele, CBN Governor

Emefiele Downplays FX Scarcity, Says Insecurity Drives Inflation

Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN) downplays (FX) foreign exchange scarcity, attributing the country’s rising inflation to worsening insecurity in parts of the country.

Emefiele stated this on Tuesday while presenting the communique from the Monetary Policy Committee (MPC) meeting which started on Monday.

Primary responsibility of the CBN is to ensure price stability using monetary policy tools but Nigeria’s headline inflation has maintained uptrend, threatening the apex bank single digit target between 6 to 9%.

At the MPC meeting, Emefiele explained that the inflation, which has increased for the 18th consecutive month, was exacerbated by food inflation.

He said that insecurity in many food producing areas of the country was a major contributing factor.

“The MPC noted with concern the continued uptick in inflationary pressure for the 18th consecutive month as headline inflation continued on an upward to 17.33 per cent at the end of February 2021 from 16.47 per cent in January 2021.

“This increase continue to be attributed to both food and other core components of inflation.

“This specific uptick in food inflation was the major driving factor for the uptick in headline inflation.

“This was due to the worsening security situation in many parts of the country, particularly the food producing areas where farmers faced frequent attacks by herdsmen and bandits in their farms,’’ he said.

The apex bank’s governor said that while the bank was making significant intervention in the agricultural sector, the rising insecurity was limiting expected outcomes in terms of supply to the markets.

He added that the situation was a major contributory factor to the rise in food prices.

Emefiele urged the Federal Government to collaborate with relevant stakeholders to urgently address the challenge of insecurity across the country.

He said that the inflationary trend was also worsened by the hike in the pump price of petrol, the upward adjustment of electricity tariff as well as depreciation in the value of the Naira.

He, however, commended CBN’s various interventions to boost food security through its various agriculture programmes.

The CBN Governor downplayed impacts of foreign exchange scarcity that has impacted significantly the value of the local currency, Naira.

Nigeria Shifts Towards Flexible Exchange Regime

Some analysts believe that while supply shock is a key factor driving price increase, scarcity of foreign exchange to meet producers demand is also a contributing factor.

CBN disburses N1.487 trillion to boost food security

The CBN said it has disbursed N1.487 trillion under its various agricultural programmes to boost food security, Emefiele said while presenting the communiqué.

According to him, sum of N107.60 billion were given to 548,109 farmers cultivating 703,619 hectares of land between the fourth quarter of 2020 and the first quarter of 2021 to boost dry season output.

He said, “total disbursements as at end-February 2021 amounted to N1.487 trillion under the various agricultural programmes, of which N686.59 billion was disbursed under the Commercial Agricultural Credit Scheme (CACS).

“The bank also disbursed N601.75 billion under the Anchor Borrowers Programmes (ABP) to 3,038,649 farmers to support food supply and dampen inflationary pressures.

“Under the Targeted Credit Facility, the bank has disbursed N218.16 billion to 475,376 beneficiaries, of which 34 per cent of beneficiaries are SMEs.

“Under the Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS), N111.62 billion has been disbursed to 28,961 beneficiaries, 70 per cent of which are in the agricultural sector.’’

The governor said that the CBN had also made huge investment in youth development through the creative industry, efforts to boost electricity supply as well as health financing.

“Under the Creative Industry Financing Initiatives mainly targeted at youth, N3.19 billion has been disbursed to 341 beneficiaries, of which 53 per cent is to the movie industry.

“Under the National Mass Metering Programme, N33.45 billion has been disbursed to nine distribution companies for the procurement of 605,852 meters.

“N89.89 billion has been disbursed under the Nigeria Electricity Market Stabilisation Facility (NEMSF 2) to 11 distribution companies to improve the electricity supply industry in Nigeria.

“Under the N100 billion Health Care Intervention Fund; the bank has disbursed N94.34 billion, and is willing to expand the facility, to 85 projects in the pharmaceutical industry.

“It is mostly to expand pharmaceutical drug lines, acquire six MRI and other equipment and upgrade laboratories and other hospital services,’’ he said.

Emefiele said that the apex bank also disbursed N803.36 billion to 228 projects across various sectors in agro-allied, mining, steel production and packaging industries under the N1.0 trillion Manufacturing Intervention Stimulus.

Emefiele Downplays FX Scarcity, Says Insecurity Drives Inflation