Rising Inflation: “There is no magic wand,” – Central Bank of Nigeria Governor Calls for Patience

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has called on Nigerians to remain patient as the country grapples with inflation and rising food prices. 

Speaking at a press briefing following the Monetary Policy Committee (MPC) meeting in Abuja, Cardoso explained that combating inflation is a gradual process that requires time and perseverance.

“There is no magic wand,” Cardoso remarked, stressing the need for patience. “These are things that need to take their time. I am pleased and confident that we are beginning to get some relief, and in another couple of months, we will see more positive outcomes from what the Central Bank has been doing.”

Despite the pressures from food inflation, Cardoso noted that the general inflation rate was showing signs of moderation. He highlighted that the tools employed by the CBN are starting to yield results. 

“The tools the Central Bank is using are working,” he stated, expressing optimism about the future.

Cardoso also detailed the challenges that continue to hamper efforts to curb food inflation, including the high costs of transporting farm produce, infrastructural issues within the distribution network, security challenges in food-producing areas, and the impact of exchange rate fluctuations on the prices of imported food items.

“The committee thus reiterated several challenges confronting the effective moderation of food inflation,” Cardoso said. “These include rising costs of transportation of farm produce, infrastructure-related constraints along the line of distribution network, security challenges in some food-producing areas, and exchange rate pass-through to domestic prices for imported food items.”

Additionally, the CBN attributed the recent volatility in Nigeria’s foreign exchange market to seasonal demand for dollars. The MPC’s communique pointed out that the fluctuations are reflective of the dynamics of demand and supply in a freely functioning market system. 

“Members further observed the recent volatility in the foreign exchange market, attributing this to seasonal demand,” the communique stated.

The CBN has implemented several measures to control inflation, including monetary tightening policies such as cutting the number of Bureau de Change (BDC) operators from 4,173 to about 1,518 and clamping down on the cryptocurrency market, aimed at curbing speculation. However, these efforts have faced significant obstacles, including the structural challenges outlined by Cardoso.

Experts’ Opinions on Tackling Inflation

Economic experts suggest that while the CBN’s monetary policies are necessary, they are not sufficient on their own to combat inflation effectively. They advocate for a more comprehensive approach that addresses both supply-side and demand-side factors.

Kalu Aja, a prominent financial analyst, has emphasized the need for structural reforms alongside monetary policy. “The CBN cannot fight inflation alone. There must be a concerted effort to improve infrastructure, especially in the agricultural sector, to reduce the costs of food production and distribution. This will have a more lasting impact on inflation,” Aja stated.

Others have argued that the government must invest in improving infrastructure and security in agricultural regions to enhance food production and distribution. They note that without addressing the root causes of food inflation, such as poor infrastructure and insecurity, monetary policies alone will not suffice.

However, the call for patience from the CBN governor is believed to be an indication of cluelessness by many, who hold the belief that one year is enough for the government to turn the inflation tide. Against this backdrop, there is a growing consensus with the view that addressing the underlying structural problems remains critical for achieving long-term stability and growth.