CBN admits concern over impact of FX pressures, inflation and security challenges on economic activities

The Central Bank of Nigeria (CBN) has expressed concern over the declining economic activities in the country “due to exchange rate pressures, rising input prices, security challenges, and other idiosyncratic headwinds”.

The CBN deputy governor of Corporate Services, Bala Bello, disclosed this in a statement published on the bank’s website, The Punch reports.

He noted that the country’s Composite Purchasing Managers’ Index declined sharply to 39.2 index points in February 2024 from 48.5 index points in the previous month.

According to Bello, economic activity has contracted for eight months due to exchange rate pressures, inflation and security challenges.

Bello said: “It is concerning to note that the Composite Purchasing Managers’ Index declined sharply to 39.2 index points in February 2024 from 48.5 index points in the previous month.

“Economic activity has been contracting for eight consecutive months, mainly due to exchange rate pressures, rising input prices, security challenges, and other idiosyncratic headwinds. This calls for well-nuanced policy decisions targeted at price stability to forestall stifling economic activities and derailing output performance.

“Of more concern is the rising inflationary trend despite sustained hikes in the monetary policy rate, with forecasts of further price increases in the near term.

“Both food and core inflation rose in February 2024, underpinning an acceleration in headline inflation to 31.70 per cent in February 2024 from 29.90 per cent in the previous month.

“This continued rise in inflation was mainly due to high production costs, lingering security challenges and exchange rate pressures,” he said.

He added that the country’s inflation soared to 33.22 per cent in March, which was unacceptable and required coordinated efforts to curb it.

“Inflation is currently unacceptably high and requires decisive and coordinated efforts to curb it, given its adverse impact on citizens’ purchasing power, investment decisions and broad output performance.

“The Federal Government’s initiatives addressing food insecurity, such as releasing grains from the strategic reserves, distributing seeds and fertilizers, and supporting dry season farming, are important and commendable,” he added.