By Francis Ogwo
By the end of December 2020, Nigeria’s inflation rate which stood at 12.82 per cent in July may be hitting up to 14.15 per cent owing to the Federal Government’s deficit rises induced by the economic challenges of the COVID-19 pandemic.
This was contained in a report by the Central Bank of Nigeria on Friday titled ‘Monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2020/2021’.
According to the report, fiscal and monetary policy responses were put in place to ameliorate the harsh impacts on growth-inducing sectors of the economy caused by the pandemic.
“Although these measures are commendable, there are headwinds that may undermine these expectations.
“These include increased Federal Government deficits, which may narrow fiscal space and crowd-out private investment; underutilisation in the labour market due to weakened aggregate demand and a build-up in inflationary pressures resulting from the increase in Value Added Tax and border protection.”
“Specifically, headline inflation is expected to hover around 13.97 and 14.15 per cent at end-December 2020, owing to supply shocks, which may likely happen due to decline in economic activities, globally as a result of COVID-19 pandemic that started in China in Q4:2019; demand shocks emanating from domestic and international lockdowns; food supply shocks associated with non-tariff border protection; and effect of the implementation of the new budget and minimum wage.”
The report further stated that in 2020/2021, the primary objective of monetary policy remained the maintenance of price and financial system stability.
“With the upward trend in inflation from the first half of 2019, lingering uncertainties from the external environment would exert pressure on monetary tools,” the report added.
Recall that several sectors of Nigeria’s economy totally collapsed in the wake of the pandemic while others operated under huge liabilities.
