Ever since CBN governor, Godwin Emefiele, introduced the naira redesign policy in November 2022, it has brought nothing but chaos.
The latest failure in the policy to rear its head is an inflation rate of 21.91%, which is the highest rate Nigeria has experienced in 18 years.
This comes off as strange however because there hasn’t been any money in circulation in the last two months. Isn’t there supposed to be a reduction in inflation when there’s hardly any cash in circulation?
How bad was the inflation and what is the government’s response to this? Let’s dig in:
In February, inflation was mostly caused by a rise in the prices of food, as it rose to 24.35 per cent year-on-year.
Food was more expensive in Kwara as food inflation hit 29.51 per cent, Imo (27.47 per cent), and Lagos (27.42 per cent).
It was lowest in Sokoto (18.54 per cent), Jigawa (19.67 per cent), and Yobe (21.89 per cent).
It was also disclosed that increase in the price of bread, cereal, rent, potatoes, yam, tubers, vegetables, and meat drove inflation up in February.
What was the CBN’s response?
It was one of defence. Emefiele claimed that the recent monetary policy decisions are working. According to him, “We have started to see inflation trending downwards and exchange rates relatively stable.”
Of course, the National Bureau of Statistics has proven that to be false.
But let’s hear from the Research analyst at Atlas Portfolios Limited, Olaide Baanu to tell us about this.
What does the expert say?
According to Baanu “The increase recorded can be attributed to the ongoing cash crunch, as some vendors now require extra charges for payments.”
The food inflation expanded by three base points to 24.35 per cent year-on-year following the cash crunch policy and dry-season effect as Nigerians search for cash to purchase scarce staple foods (like meat, tubers, vegetables, etc.) from farmers.”
What happens next?
Right now, CBN has granted citizens permission to make use of the old naira notes as legal tender, but would this reduce inflation? Would it be higher than before?
Let’s wait and see.