Muhammad Sani Abdullahi, Deputy Governor of the Economic Policy Directorate at the Central Bank of Nigeria (CBN), has forecasted a significant rise in Nigeria’s headline inflation, projecting it to reach 32.63% in March 2024. Abdullahi shared these projections during the CITI-CEEMA Macro Conference held in London on March 20, 2024.
Highlighting the factors driving this inflation spike, Abdullahi pointed to escalated energy costs, the impact of exchange rate fluctuations, and ongoing security challenges as major contributors. The removal of fuel subsidies has led to increased household utility, transportation, and production costs, while the depreciation of the naira due to market-determined exchange rates is expected to pass through to domestic prices. Additionally, insecurity has affected food production, compounded by the conclusion of the harvest season and the high cost of agricultural inputs, all contributing to higher food prices.
Despite the grim outlook, the CBN anticipates a turnaround, with inflation projected to begin its descent from May 2024 onwards. This optimism is underpinned by a series of strategic measures aimed at addressing the inflationary pressures. These measures include the adoption of an Inflation Targeting Framework, enhanced communication strategies, and a shift towards a tighter monetary policy stance.
To combat rising inflation, the CBN has implemented significant policy adjustments, including a 400 basis point increase in the Monetary Policy Rate (MPR), which now stands at 22.75%, and an adjustment of the Cash Reserve Ratio (CRR) to 45% from its previous level of 32.5%. Moreover, changes have been made to the asymmetric corridor around the MPR, widening it to +100/-700 basis points from +100/-300 basis points, signaling a robust stance on managing inflation expectations.
These proactive measures reflect the CBN’s commitment to stabilizing inflation and ensuring macroeconomic stability in Nigeria amidst challenging economic conditions.
