As inflation spiked to a fresh height last month, curbing the unpleasant situation is undoubtedly one of the major tasks that will be confronting the Central Bank of Nigeria’s (CBN) Monetary Policy Committee as it meets next week.

On Friday, figures released by the National Bureau of Statistics (NBS), revealed that the cost of food is a major driver of inflation in the country.

The food inflation rate in February was 37.92 per cent on a year-on-year basis, which is 13.57 per cent points higher compared to the rate recorded in February 2023 which stood at 24.35 per cent.

To be specific, increases in the price of bread and cereals, potatoes, yam and other tubers, fish, oil and fat, meat, fruit, coffee, tea and cocoa were identified as focal points.

Indeed, the report said the average annual rate of food inflation for the 12 months ending February 2024 over the previous 12-month average was 30.07 per cent, which was a 7.95 per cent point increase.

On a month-on-month basis, the headline inflation rate in February 2024 was 3.12 per cent, which was 0.48 per cent higher than the rate recorded in January 2024 (2.64 per cent). This means that in February 2024, the rate of increase in the average price level is more than the rate of increase in the average price level in January 2024.

Observers said with the continued rise in the inflation rate driven majorly by a general rise in the prices of basic food items, raising the monetary policy rate (MPR) may be the only veritable tool available to the apex bank to rein in the runaway inflation.

But the argument may not be the cure-it-all as the cost of borrowing will also increase concomitantly exacerbating cost production. Hence, the MPC may be caught between two extreme evils, requiring it to pick the lesser evil.

The CBN has historically used the policy rate or the benchmark interest rate to influence borrowing and lending rates in the economy. By adjusting the MPR, the CBN can control the cost of credit and influence consumer spending and investment levels, which in turn can impact inflationary pressures.

It is also using Open Market Operations (OMO), which has been oversubscribed in recent weeks.Will the CBN governor, Yemi Cardoso, implement inflation target plans going forward? Overall, the CBN’s efforts at curbing inflation in Nigeria through monetary policy rate management involve a combination of tools and strategies aimed at influencing borrowing costs, managing liquidity, controlling credit expansion, and supporting the stability of prices in the economy. These measures are essential for maintaining macroeconomic stability, promoting sustainable growth, and ensuring price stability in Nigeria.

Director, Obsidian Archenar Nigeria, Kelvin Emmanuel, said the challenges before the MPC are daunting. He insisted that the continued rise in inflation to 31.7 per cent is proof that inflation cannot be fought by raising interest rates to tighten.

He explained that the MPC now must walk a very tightrope considering that the proposed amendment in the 2007 CBN Act that would place a hard stop of an ISPO on the FG’s share of FAAC receipts as a tool to reduce quantitative easing for controlling money supply, that has contributed to inflation, is yet to be passed into law.

He charged the fiscal authorities to complement the MPC by raising food output and reducing Nigeria’s exposure to nine items that form its energy basket.

He added: “I expect that as a tool to reduce the flight of capital from naira to dollar-denominated assets, the MPC might want to raise MPR by another 150-200 basis points at their 294th meeting. But the risk this brings of course is that the non-performing loan book of banks will keep rising in the same year that the CBN is asking banks to recapitalize their minimum capital as a tool to improve the gearing ratio that has gone from $300 million to $75 million for Tier 1 banks due to currency devaluation”.

Commenting on the continued rise in inflation, a retired banker, Ade Mohammed, asked if Cardoso’s optimism that inflation will begin to decelerate in the first quarter of the year is still realizable considering we are already in March.

He said: “Nigeria’s headline inflation rate rose to 31.7 per cent, up from 29.9 per cent in January 2024, recording an increase of 1.8 per cent. This represents the biggest jump since Cardoso took over. Indeed, Cardoso had predicted an end to inflation rise by quarter one. Will that still be possible?”

While he does not see any improvement in the prices of food as a result of 2.15 million bags of fertilizer donated to Nigerian farmers through the Ministry of Agriculture, Mohammed thinks that the ravaging insecurity and the rising costs of transportation courtesy of the removal of petrol subsidy are responsible for the continued rise in prices.

“Look, whether the CBN wants to go back to direct intervention or not, none of that will work until insecurity is tackled headlong. I think bandits aim to reap economically from the trade (that is what it has become) or to ensure that there is food insecurity in the country. There are no two ways about this. The government must put an end to insurgency, banditry and kidnappings. Farmers in the far north cannot go to farms. Farmers in the middle belt cannot go to the farm. These two regions are mostly the food basket of the nation.

“To compound the whole thing, the borders are closed and tariffs on food items are prohibitive. The government, especially the President, needs to take a few steps backward and think about how to tackle food inflation. This is a recipe for violence and civil unrest that may be difficult to contain once it happens. Food must be affordable and the people must be able to afford it.

“Yes, I agree that there is no food scarcity in the country, but affordability. What can the people do when the minimum wage is still N30,000 which is mathematically below $30? The government must find a way to put more money in the hands of the people and also protect the most vulnerable segments of our society,” he stated.

He expressed optimism that addressing food prices and arresting the continued slide of the naira are vital to taming inflation. A public analyst, Lekan Oladele insisted that the inflation figure was expected considering recent happenings in the economy.

He said: “FX rate moved from about N1,300/$ to N1,980/$ within February, setting panic into the market and causing many merchants to adjust prices for FX volatility. Diesel went up, causing haulage rates to go up too. The jump in inflation was not unexpected.” He placed local production of food over the attention being paid to the exchange rate. He urged the government to engage the local farmers through local government councils to address surging food prices.