The Central Bank of Nigeria has retained the policy rate at 11.5 per cent despite the country’s three-year high inflation, a decision it said sought to ensure a balance between the need for price stability and growth.
The CBN governor, Godwin Emefiele, announced this Tuesday after the Monetary Policy Committee meeting that began Monday. The bank also retained other parameters as it did in February.
The decision was not unanimous as some members voted to increase the benchmark lending rate to check stagflationary pressure that has seen prices skyrocket across sectors in the country amidst high unemployment.
Increasing the lending rate should aim primarily at reducing money supply in the economy, a key tool in fighting inflation. However, doing so can slow economic growth at a time the country has just exited a recession, with businesses not able to borrow much to fund their operations.
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Stagflation is typically characterised by an increase in prices which occur when there is an increase in inflation rate, rising unemployment, high misery index, and lower economic output.
Nigeria’s inflation rate rose to 17.33 per cent in February 2021, from 16.47 per cent in January.
The NBS said in its report that food inflation rose to 21.79 per cent in February, compared to 20.57 per cent recorded in January 2021, the highest point since the data series began over a decade ago.
The prices of food rose earlier in the month when a blockade was announced by food and cattle suppliers.
The blockade led to a sharp rise in the prices of beef, foodstuff and vegetables, worsening Nigeria’s runaway food inflation.