The Central Bank of Nigeria, CBN),has indicated that fiscal policy gaps and other factors outside its control have constrained the ability of its policies to have an impact on price stability in the economy.
The apex bank in its post Monetary Policy Committee (MPC) report expressed worry at the developments in the inflationary pressure since this year amidst its monetary policies aimed at curtailing excess liquidity, one of the main drivers of inflationary pressures.
In the report CBN stated ‘’the drivers of the current upward inflationary spiral were of a transient nature and mostly outside the direct control of monetary policy. Consequently, the opportunity for further policy manoeuvre remains largely constrained in the absence of supporting fiscal measures’’.
This would mark the first official position of the apex bank in the emerging economic challenges that appeared to have defied all its efforts in recent months in the area of macroeconomic management.
The general statement of the MPC by the CBN Governor, Mr. Godwin Emefiele, urged for coordination of monetary, fiscal and structural policies to stimulate output growth, and stabilize the exchange rate.
The last MPC meeting had expressed concern about the gradual but steady increase in headline inflation up to June 2015, and noted that this reflected a rise in both the core and food components of inflation.
Core inflation rose to 8.4 per cent in June from 8.3 per cent in May, and food inflation increased to 10.0 per cent from 9.8 per cent, over the same period. The Committee observed that the uptick in year-to-date inflation rates was traceable to transient factors such as energy, arising from scarcity of petroleum products around the country, poor electricity supply and increased demand for transportation and food, from the build-up to the general elections and the ensuing Easter and Sallah celebrations.
The Committee reiterated its commitment to price stability, and observed that monetary policy would remain tight because of the high liquidity in the system.
Meanwhile, according to the statement, Broad money supply (M2) declined by 0.61 percent in June 2015, below the level at end-December 2014.
The modest decline in money supply reflected the decreases in the net foreign assets of 16.15 per cent and other assets (net) of 21.40 per cent.
During the period under review, money market interest rates were relatively volatile, owing to fluctuations in banking system liquidity.
Average inter-bank call and OBB rates opened at 6.55 and 6.45 per cent on 1st July, 2015 and closed at 26.51 and 21.00 per cent, respectively, on July 23, 2015. Average inter-bank call and OBB rates for the period were 9.83 and 10.23 per cent, respectively.
The seven month steady rise in headline inflation, measured by the Year-on-Year (YoY) change in the All-items Consumer Price Index (CPI), appeared to have been tamed as figures announced two weeks ago by National Bureau of Statistics (NBS) put inflation rate for July 2015 at 9.2 per cent, same as in June. Headline inflation has been on steady rise since December 2014.
NBS report for July showed a slower increase in price level during the month in Food & Beverages; Utilities & Other Fuels; and Furnishings & Household Equipment Maintenance divisions.
Also, the report shows food inflation remained steady at 10.0 per cent in July, the same rate recorded in June.
According to the NBS, high imported food prices and demand from the Ramadan period contributed to the rise in prices in the sub-index, while slower increase in the prices of meats, fish, fruits, and tubers moderated the pace of the increase during the period.
However, core inflation which is the price of all items excluding the price of agricultural produce inched up further by 40 basis points to 8.8 per cent in July, from 8.4per cent in June. According to the NBS, the increase was contributed by the rise in prices in the Transportation, Education, and Miscellaneous Goods & Services divisions.