Uduegbunam ChukwujamaAmid widespread hardship trailing Nigeria’s naira policy implementation, the country’s central bank says inflation is already abating and could pleasantly drop some 4 percent off its current 22 percent rate by mid 2023.
The general scarcity of the naira notwithstanding, Prime Business Africa (PBA) reports price drops across major goods and services as money supply falls sharply in different parts of the country.
Ms Chikodi Ogbuabuo, a senior staff of the Abia State University, Uturu, told PBA Correspondent that naira policy, with its the attendant scarcity, is forcing down prices in the area, even as many find it difficult to raise cash to pay for goods and services in rural communities.
“I went to the bank on Monday and was given N2,000, even though I wanted to withdraw N10,000,” Chikodili, a native of Amiyi-Obilohia in Oguduasaa area of Abia State told Prime Business Africa on Wednesday.“Truth is that prices that were artificially hiked are coming down generally in the Southeast but no one finds cash to buy things. Our rural women here cannot do electronic transactions, so whoever manages to get cash is king and could buy things much cheaper than before,” she said.
Chikodili said a 25-litre keg of palm oil that used to sell for N27,000 currently goes for N12, 000 on the back of new naira note scarcity, as few who have old notes are no longer able to spend them.
As hardship spreads following failure of banks to meet demand for cash and the seeming loss of confidence in electronic channels by many in rural areas, the CBN says that effective implementation of the naira policy could by itself scrape four percentage points off the current level of inflation, as it steadily slows inflation rate to about 18.0 percent by mid-2023.
Its governor, Godwin Emefiele while briefing members of the Diplomatic Community in Abuja on Tuesday said “currency redesign policies are designed by countries to strengthen the performance of key macroeconomic parameters and equally combat social improprieties.”
He argued that the current policy, though tough at the beginning, will reduce the amount of cash in underground or illicit economy, truncate the activities of racketeers, and obliterate rent-seeking businesses in the black market.
“By reducing currency outside banks, it will shrink money stock and accordingly lower the long-run path of inflation. The ensuing deflationary pressure could elicit interest rate cuts that will in the short- to medium-term boost economic activities, spur aggregate demand, and enhance output growth.”
Emefiele said that the policy is typically expected to cause deflation in the market as less cash holding reduces currency outside banks and retards money circulation. “The accompanying decline in money supply will thus slow pace of inflation.
“As you can see, we have stated to witness inflation trending downwards, following general price stability in almost all genre of markets including for goods and financial products.”
Emefiele said: “This is quite achievable, as data from our market sources indicate that the prices of grains and key staples, around Suleja and Lambata markets for instance, have generally been on the downward trend since the beginning of the policy.
Naira Policy: See New Prices in Abuja Markets
According to the CBN governor, prices of Soya beans, maize, bull and ram for instance dropped by as much as 15 per cent within the period under review.
The price for soya beans has dropped from N30,000 to N22,000. Maize from N18,000 to N16,000. The price of a bull fell from N400,000 to N330,000 and ram from N75,000 to N50,000.
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