Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, disclosed on Friday during a plenary session in the Senate that the apex bank is currently unable to fund additional intervention programs due to escalating food inflation. He emphasized that the CBN has ceased over N10 trillion quasi-fiscal measures, previously disguised as intervention programs, to curb the distortions caused by excess liquidity in the economy.
Cardoso underscored the adverse impact of these quasi-fiscal measures on core inflation and food inflation, citing a 31% increase in money supply (M3) from N52 trillion in January 2023 to N68.2 trillion in November 2023. He highlighted the need for monetary policy tightening to counter inflationary pressures fueled by the excess liquidity.
The CBN governor revealed the challenges of previous development finance interventions that did not achieve their intended goals, contributing to inflationary pressures. He stated, “On the issue of development finance, we are coming to terms with a large amount of liquidity that was pumped into the system that created a lot of distortions and a lot of it didn’t get to what it was designed to get to.”
Addressing the limitation in the CBN’s capacity for direct interventions, Cardoso explained that the bank is exploring partnerships with other ministries on the fiscal side to promote efficient and strategic programs. The focus is on creating a mechanism for those with the financial capacity to intervene effectively and contribute to stabilizing the economy.
He expressed the commitment to adopting an inflation-targeting framework through collaboration with fiscal authorities, promoting clear communication, and potentially leading to lower policy rates and job creation.
Nigeria is grappling with a significant surge in food inflation, reaching 33.93% as of December 2023, the highest in nearly a decade. The federal government declared a state of emergency on food security, and measures are being taken to address rising food prices, including opening the National Food Reserves. Human rights lawyer Femi Falana took the government to court over food price challenges, resulting in a court order to fix prices within seven days.