Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), has said that he is not optimistic that inflation will go down despite some tightening measures being implemented by the bank, noting that fuel subsidy will soon be removed.
Emefiele made this known while speaking at a press conference on Tuesday to mark the end of March 2023 Monetary Policy Committee meeting.
According to the governor of the apex bank, subsidy removal has its own implications, which is inflation.
The CBN governor added that most likely before the end of May, fuel subsidy will be removed.
He said, “Well, first, I think we must appreciate the fact that between April 2022 and August 2022, we were seeing a very steep rise, a very steep to slope in the rate of increase in inflation in Nigeria; the rate of acceleration was quite steep.
“But from the May meeting when the global pressures on inflation began to show real signs globally, we also started to raise albeit in an attempt to change the aggressive rise in inflation. What we saw is that because of the action that we’re taking the rate of increase in prices, which is inflation, has begun to decelerate.
“For instance, between April and August, the rate of increase in inflation was about 5%. But between August and even now, the rate increase is only about 1.4%. Because of the timing measures that have been adopted by the CBN.”
Emefiele said it doesn’t follow that because “we’re tightening, inflation should immediately begin to drop”.
“It doesn’t happen that way,” he added.
“Whereas we’ll see that transmission mechanism in some economies is that it’s almost direct. As you are tightening, you are seeing inflation coming down almost immediately, but the rate of response differs from one economy to another. We believe that as we continue this process, inflation will eventually begin to go downward. Either we like it or not, we believe that before the end of May, subsidy will disappear,” the statement added.
“Subsidy removal has its own implications, which is inflation. So the government policy is not optimistic that prices will continue to come down because of these measures, that we need to continue to tighten.”