The Federal Government has admitted that the temporary policy to close land borders in the country is the reason for the rising inflation, but however insists that the border would remain closed until neighbouring countries respects trade protocols.
Since border closure in August, inflation has risen to 11.61% in October.
The President Muhammadu Buhari’s government however noted that the step was necessary because Nigeria cannot continue to subsidise economies of other neighbours. Nigeria had revealed that the smuggling of goods from neighbouring nations into Nigeria was hurting the economy.
The Federal Government had accused neighbouring nations of allowing the repacking of imported goods through land borders into Nigeria.
The Minister of Finance, Mrs. Zainab Ahmed, while speaking to State House correspondents on Wednesday after the Federal Executive Council meeting said that inflation in the country rose due to hikes in food prices because of the closure of the borders.
“On inflation, headline inflation declined every month for several months before we noticed an optic in the last two months. And now, headline inflation is at about 11:61 per cent as of the end of October,” the Finance Minister said.
“The slight increase in this inflation between September and October is due to food inflation. The food inflation relates to prices of cereals, rice and fish. And part of the reason is the border closure.
“But, the border closure is very, very short and temporary and the increase is just about two-basis point. Remember, there was a time inflation was nine per cent and it grew to about 18 per cent in January 2017 when we were in recession.
“The relationship between inflation, interest rate and growth is managed by the monetary authorities and is a management that is tracked on a regular basis.
“So, if you reduce interest rate, you expect more borrowing for investments in the real sector. But, at the same time, that also has the tendency of reducing money that is used for consumption on a day to day basis.
“So, it is a balance that we continue to watch on a regular basis. We expect that this will be moderated as border closure impact fizzles out and also as the monetary authorities continue to support the MPR (monetary policy rate), therefore ensuring that interest rates are not on the high side.”
“What we are doing is important for our economy. We signed up to the African Continental Free Trade Area Agreement (ACFTA); we have to make sure that we put in place checks to make sure that our economy will not be overrun as a result of the coming into effect of the ACFTA.
“That is why we have this border closure to return to the discipline of respecting the protocols that we all committed to”, Mrs. Zainab noted.
Ibrahim Kenneth Suleiman is the Chief Political Editor at Naija Buzz News Network. He is a graduate of political science from the prestigious Ahmadu Bello University Zaria, Kaduna State. He specializes in preparing/approving of political news contents before publication. He currently heads Naija Buzz News team of political correspondents. From Nasarawa State, North-Central Nigeria, Ibrahim is a strong supporter of Manchester United Football Club England.