THE Central Bank of Nigeria has said that the rising inflation in Nigeria may further weaken the much anticipated growth trajectory of the economy.
The apex bank revealed this in its Inflation Attitude Survey Report for the second quarter.
Nigeria has experienced a rise in inflation rate from 12.40 per cent to 12.56 at the end of the second quarter of 2020.
Driven by the impact of the COVID-19 pandemic, the country’s inflation rate peaked 29-month high at 13.22 per cent at the end of September 2020.
The apex bank report, analysed by The Point, which sampled 2,070 households, showed that 57 per cent of Nigerians, “believe that the economy would end up weaker if prices start to rise faster than they do now.”
It said that the responses showed considerable support for price stability.
The CBN report noted that the reaction was consistent with the notion that inflation constrained economic growth.
The report further indicated that most Nigerians expected prices of goods to rise by three per cent up to June 2021.
It pointed out that given a trade-off between inflation and interest rates, most Nigerians preferred interest rates to fall than inflation rate.
The response is, “suggestive of the respondent households’ support for the Bank’s price stability objective,” the lender added in the report.
The CBN, however, admitted that Nigerians were dissatisfied with its management of the country’s interest rate, as the net satisfaction index fell to nine per cent.
Meanwhile, a Professor of Capital Market Studies, Uche Uwaleke, said the negative impact of COVID-19 on the food supply chain, which was further compounded by the border closure, increase in Value Added Tax, electricity tariffs, stamp duties and upward exchange rates adjustment by the CBN in order to ease the pressure on the forex market, were the major reasons inflation was still rising despite government’s intervention programmes.
He said, “It is not difficult to see where the pressure is coming from. The economy is still reeling from the negative impact of COVID-19 on the food supply chain.
“This situation is compounded by the border closure, increase in VAT, electricity tariffs, stamp duties and upward exchange rates adjustment by the CBN in order to ease the pressure on the forex market.
“The recent increase in pump price of fuel presents further downside risks to inflation.
There is also the insecurity challenge affecting the food belts of the country which partly explains the high rate of food inflation, at over 20 per cent, in a state like Kogi.”
