Governor of the Central Bank of Nigeria, Olayemi Cardoso has disclosed factors responsible for hunger in the nation, saying there was supply shock of food items preluding yuletide and the distribution challenges due to insecurity.
Cardoso spoke at an interactive session with the Senate Joint Committee on Finance, Banking and Other Financial Institutions and National Planning, explaining that there were economic, social and security challenges that brought about food scarcity.
The Central Bank Governor was summoned by the joint Committee at the backdrop of the free fall of naira and acute hunger that has triggered pockets of protests in some states across the country.
In his address at a well-attended public hearing, the apex bank boss attributed hyper inflation to organic food shortages but added that the government was addressing the menace through fiscal policies which may take time to work out.
Cardoso said: “Headline inflation surged to 28.92%, propelled by food shortages, distribution challenges, and seasonal trends. The festive season’s consumer demand upsurge, following subdued periods due to energy and foreign exchange reforms, contributed to this trend, persisting from November through December yearly.
The upward trend of food inflation is primarily due to supply shocks caused by insecurity, climate-induced factors such as flood and rainfall shortage in some cases, inefficient, subsistent and seasonal farming practices as well as importation bottlenecks that have impacted the prices of imported food items.
In December 2023, the economic landscape revealed significant shifts. The headline inflation stood at 28.92% in December 2023 as against 28.20 % in November, food inflation was 33.93% as against 32.84% in November, while core inflation was 23.06% as against 22.38% in October 2023.
Anecdotal evidence indicates that recent exchange rate volatility has fuelled more foreign demands for agricultural products, especially from neighboring countries.
While this presents an opportunity to expand and boost agricultural output, hence creating jobs in the sector, supply constraint exacerbated demand, instigating more inflationary pressures.
Given this backdrop, the emergency committee on food security set up by the President has been taking a number of measures and we see an end in sight to the persistent rise in food inflation.
On our side at the CBN, we have responded with significant monetary policy tightening to reign in inflationary pressure.
Empirical analysis has established that money supply is one of the factors fueling the current inflationary pressure. For instance, an analysis of the trend of the money supply spanning over 9 months shows that M3 increased from N52.01 trillion in January 2023 to N68.25 trillion in November 2023 representing N16.24 trillion or 31.22 percent increase over the period.
Increase in Net Foreign Asset (NFA) following the harmonization of exchange rates and the N3.22 trillion ways and means advances were the major factors driving the increase in money supply. I am pleased to note the Fiscal Authorities efforts in discontinuing ways and means advances.”
Responding to a question from Senators, Cardoso said there were some policies in the immediate past administration that have been stopped due to incompatibility in the present administration, particularly the “Ways and Means”, which seems to have been abused.
“This is also in compliance with section (38) of the CBN Act (2007), the Bank is no longer at liberty to grant further ways and means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled.
The Bank must strictly adhere to the law limiting advances under ways and means to 5 percent of the previous year’s revenue.
We have also halted quasi-fiscal measures of over 10 trillion naira by the Central Bank of Nigeria under the guise of development finance interventions which hitherto contributed to flooding excess Naira and raising prices to the levels of Inflation we are grappling with today.”
The interactive session was attended by the Chairman, Senate Committee on Banking, Insurance, and Other Financial Institutions, Senator Mukhail Adetokunbo Abiru, Chairman, Senate Committee on Finance, Senator Mohammed Sani Musa, Chairman, Senate Committee on National Planning, Senator Abdullahi Yahaya, Vice Chairmen and members.
