Inflation Will Not Reduce Anytime Soon, Emefiele Warns

The Central Bank Governor, Godwin Emefiele has warned that inflation will not moderate anytime soon despite the bank’s monetary policy tightening.

Emefiele said this on Tuesday at the Monetary Policy Meeting.

Nigeria’s inflation rose in January and February from 21.82 per cent to 21. 91 despite the hike in the bank’s MPR from 16.5 per cent to 17.5 per cent in January 2023.

This led to a second hike in the MPR to 18 per cent in March, the bank announced.

But Emefiele expressed fears that the inflation rate will not reduce in the coming months following the removal of fuel subsidy by May, 2023 as scheduled by the Federal Government.

Emefiele said, “What one would expect is because we are tightening, inflation should immediately begin to drop. It doesn’t happen that way. What you will find particularly in our environment is that as you are tightening, what you want to do is to first of all stem that rate of increase before you begin to see a reduction.

“Once you achieve a kind of moderation in the rate of increase in inflation, the next thing you will beginning to see is that it will start coming down as you begin your tightening policy.

“We believe that as we continue this process, that inflation will begin to trend downwards. Are we optimistic that may inflation will start to trend down? We are not that optimistic for a range of factors. Whether we like it or not, between now and may or the end of the administration, we expect that subsidy will disappear. Subsidy removal has its own implication on prices which is inflation.”

He said the bank will continue to increase its MPR cautiously to avoid a negative impact on banking system stability.