The Issues relating to the new naira redesign and swap came to a crescendo on Friday the 3^rd of March, 2023 as the apex court nullified the Federal Government’s decision to stop the old N500 and N1,000 notes from being legal tenders. In its ruling, the Supreme court took a decision that the old naira notes, N200, N500 and N1,000 should exist side by side with their replacements till the end of 2023.

The CBN had in the last quarter of 2022 initiated three policies, the Currency Redesign, National Domestic Card Scheme and Cash Withdrawal Limit. The redesigned naira notes were launched on the 23rd of November 2022 and its circulation started on the 16^th of January with the 31st of January and later extended till the 10^th of February 2023 as the last date for the use of the old naira notes as legal tenders. Governors of some states in Nigeria, including Kaduna, Lagos, Rivers, etc., obtained Exparte Motion from the Supreme Court to halt the implementation of the policy and restrain the Federal Government from enforcing the 10 February, 2023 deadline on Naira swap. In its initial ruling, the apex court decided that both the old and the new naira notes should be allowed to co-exist till the 15^th of February when the motion was heard in the court. This was not obeyed by the CBN who rather decided that only the old N200 notes should exist with the new one till the 10^th of April before total eradication as a means of exchange, claiming that they are not joined in the case. It also granted holders of the old N500 and N1,000 till 17^th of this April to swap them with new notes at CBN offices nationwide.

The substantive case was heard on the 3^rd of March. The Supreme Court ruled that the old and the new naira notes should co-exist till the 31^st of December, 2023, to give the federating units adequate notice, since the President could not afford them adequate notice before implementing the new monetary policy through CBN. This has been the crux of the matter. The apex bank has claimed ignorant of the case since it was not joined in it. It opined that any such matter in which it will be joined should have emanated from the High Court. Hence, the outcome of the Supreme Court judgement on the matter is not binding to CBN. Based on this, the CBN has diplomatically refused to make pronouncement on even the latest judgement which extended the deadline for the use of the old notes.

Since the implementation of the policy, majority of the old notes have been mopped up from circulation, while the new naira notes have remained elusive despites the scarcity of cash. This has grounded many businesses as petty traders and consumers who complete the production cycle do not have access to cash to make their transactions. The manufacturing sector is facing poor sales due to the shortage of cash for individuals to make purchases, leading to unplanned accumulation of unsold inventory in the industries.

Respite has come in the way of economic agents if the Supreme Court judgement nullifying the policy is complied with. The circulation of cash will improve the sales and profits of businesses. There are more reasons to heed to the judgement of the apex bank. Nigeria’s economy is largely a rural economy, with a huge informal sector and high illiteracy level. Ther are also over 30 million Nigerians that are unbanked. This makes it imperative to rethink this policy.

On the other hand, the judgement of the apex court is capable of taking the economy back to the level where over 80 per cent of the raw cash was hidden by individuals, causing steady rise in inflation. It will return the monetary policy back to the status quo. The era of rising inflation, the era where the money paid as ransom is still relevant in the hands of bandits and terrorists. With the gubernatorial election on the 11^th of March, more of such cash will be pushed out to buy votes, and this may worsen inflation in the days to come and further reduce the disposable income of consumers.

Since the beginning of the current administration in 2015, the economy has witnessed persistent movement down south. While the rate of inflation has moved from 11.4 per cent in 2019 to about 18.8 per cent in 2022, the national currency has also depreciated from about 307 naira to a dollar in the official market in 2019 to about 426 naira to a dollar in 2022 (See Table 1). This downturn in economic activities has impoverished the population, apart from the hike in the cost of production, purchasing power of consumers nosedived to the point where their welfare has eroded. This is corroborated by the release by the National Bureau of Statistics (NBS) that the rate of unemployment in Nigeria is over 33 per cent and that over 130 million Nigerians are facing multidimensional poverty.

In defence of the collapsing national currency (naira) and the skyrocketing inflation which has eroded purchasing powers of consumers and led to the closure of many industries, the CBN Monetary Policy Committee (MPC) consistently increased the Monetary Policy Instrument (MPI). For example, the MPI was raised from 11.5 per cent in January 2022, to 13.0 per cent in May and to 16.5 per cent in November 2022 (See Table 2). This is based on the understanding that inflation is always caused by a higher supply of money beyond the quantity of goods and services in the economy. The essence of the consistent application of a contractionary monetary policy was to cause an increase in the lending rate so as to discourage access to money by borrowers and curb the increasing inflationary trend.

Currency Redesign

 The Central Bank of Nigeria (CBN) announced on the on October 26, 2022, that it has concluded arrangements to redesign 200, 500, and 1000 denominations of the naira which have about 75 percent of the notes outside the banking industry. The CBN opined that the redesigning of the naira notes will phase out old notes and render useless, huge amounts of raw cash in the hands of politicians, kidnappers, and terrorists. The essence of this policy is to mop up excess cash outside the banking industry with a view to handling monetary policy and foreign exchange programs credibly. The redesigned naira notes have been launched on the 23rd of November, the last date for the use of the existing 200, 500, and 1000 notes for transactions in the country is the 31st of January 2023. According to the CBN, the redesigning of the currency will help control the amount of money in circulation, estimated to be ₦2.73 trillion, out of the ₦3.23 trillion currency in circulation. Retrieving about 84.5% of the total amount in circulation back to o the CBN’s vault will help curb rising inflation and safeguard the integrity of the Naira.

National Domestic Card Scheme

Another policy that will shape the face of the financial sector from 2023 is the national domestic card scheme planned for introduction from the 16^th of January 2023 by the Central Bank of Nigeria (CBN) and the Nigeria Inter-Bank Settlement Systems (NIBSS) Plc, in conjunction with the Bankers’ Committee. According to the CBN, the card scheme will foster innovation within the Nigerian domestic market, while enabling African and international interoperability, The domestic card is expected to enable seamless dissemination of government-to-person or even person-government payments, such as micro payment and credit, e-government, identity management, transportation, health sector and agriculture and other social impact initiatives as well as track spending.

The domestic card will accelerate financial inclusion programme of the government, as well as deliver lower cost payments services that are more accessible and affordable for Nigerians, i.e., the national card scheme will reduce operating cost of cards in the country. The scheme will allow banks and other institutions to offer a variety of solutions including debit, credit, non-interest, virtual, loyalty and tokenized cards, etc. The implication of the introduction of the national domestic card is that ATMs will be scrapped. Hence, Nigerians will queue at their banks for a new card from January 2023. This also has the tendency to limit cash in circulation.

Revised Cash Withdrawal Limit

To further curtail the ravaging inflation and improve the cashless policy of government, the CBN, in addition to its currency redesign policy launched on the 23rd of November by Mr. President, President Muhammadu Buhari, is set to implement a new cash withdrawal limit from January 2023. In its policy document released on the 6^th of December, the CBN has instructed all Deposit Money Banks (DMBs) and other financial institutions to limit the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week to N100,000 and N500,000 respectively, with withdrawals above the thresholds attracting processing fees of 5 per cent and 10 respectively for individuals and corporate entities going forward.

Similarly, the CBN has pegged the maximum cash withdrawal per week via Automated Teller Machine (ATM) at N100,000 subject to a maximum of N20,000 cash withdrawal per day, in the same way that the daily maximum cash withdrawal via the Point of Sale (PoS) terminal has been set as N20,000 cash. Also, third party cheques above N50,000 shall not be eligible for OTC payment while extant limits of N10 million on clearing cheques remain. The new policy also limits the highest denomination to be uploaded in the ATM machines as N200 notes.

However, where bank customers have reasons to withdraw N5,000,000 or N10,000,000 depending whether such a customer is operating as an individual or corporate entity, such person must pay the compulsory processing fees as an individual or corporate entity. Such a customer must also fulfil all the requirements of the Know Your Customer (KYC) as will be required by the DMBs. While the believes that the policy will enhance the efficiency of the payment system, support economic growth and monetary policy transmission, there is this palpable fear that the policy will lead to cash crunch and crumble the opportunities for SMEs to grow thereby limiting the envisaged economic growth.

Likely Consequences

No doubt, these policies will impact negatively on the informal sector which makes up about 80% of commerce and trade in the economy and reside mostly in the rural areas without access to the right infrastructure for a cashless transaction and where no banks or other financial institutions exist. A reduction in the quantity of cash in circulation, the main means of exchange in the country, as targeted by these policies will result in the slowdown of business transactions in the sector and reduce economic activities, especially in the short run. If not properly addressed may force the informal sector to abandon banking activities which may negate the financial objective of the CBN.

However, a move towards reducing the quantity of money will create greater opportunities for more economic agents to move into the formal sector thereby helping authorities to collect taxes and improve revenue generation. This will lead to fast, seamless and transparency in business transactions, ease of monitoring of transactions and thus reduces corruption. The main reason for these new CBN policies is to enhance the effectiveness of monetary policy through the mopping up of excess liquidity to curtail the ravaging inflation in the country, and to drag most of the population into the financial system.

The Nigerian inflationary trend has continued to move northwards since the beginning of the year. The year-on-year has moved on from 15.6 per cent recorded in January 2022 to 18.6 percent and to 21.09 per cent in October (see figure 1 below). According to the National Bureau of Statistics (NBS), the year-on-year inflation in October was 5.09 percent points higher than the 15.99 percent rate recorded in October 2021. This implies that the general price level rose by 5.09 percent between October 2021 and October 2022. On a monthly basis, the inflationary trend nosedived from 1.36 percent in September to 1.24 percent in October. This shows that the general price level declined by 0.12 percent in the month of October. This decline in the monthly inflation rate has been consistent in the last three months, from 1.82 percent in the month of July to 1.77 percent in August, 1.36 percent in September and then to the current 1.24 percent recorded in the month of October. This decline is made possible given the harvesting season.
 

However, the yearly headline inflation has continued to soar. The NBS attributes that to the disruption in the supply of food products and the increase in the cost of importation due to the persistent currency depreciation as well as the general increase in the cost of production such as the increase in energy cost. Unfortunately, this increase is not showing any sign of decline as Russia’s invasion of Ukraine and the lockdown in critical Chinese cities, the major causes of the global inflation that has transmitted to the increases in energy and food costs in the domestic economy is not abating. In Nigeria, the persisting uptrend in energy prices and the prolonged period of scarcity of Premium Motor Spirit (PMS), which contributed to a sharp rise in transportation, logistics and manufacturing costs, which fed through to consumer prices; as well as the contributory legacy factors including the lingering insecurity across the country; perennial flooding in major food producing states; critical deficit of infrastructure in the country; and poor road networks amongst others, are not still showing any sign of abating. This is exacerbated by the excess supply of money in the economy. According to the CBN, about 2.7 trillion naira out of the 3.2 trillion-naira cash in circulation outside the banking industry are another reason why inflation has continued to rise in Nigeria.

To help take control of the money in circulation, and curb rising inflation, the CBN announced a redesigning of 200, 500, and 1000 denominations of the naira which have about 75 percent outside the banking industry. The CBN opined that the redesigning of the naira notes will phase out old notes and render useless huge amounts of raw cash in the hands of politicians, kidnappers and terrorists. The essence of this policy is to mop up excess cash outside the banking industry with a view to handling monetary policy and foreign exchange programs credibly . The redesigned naira notes have been launched on the 23rd of November, the last date for the use of the existing 200, 500, and 1000 notes for transactions in the country is the 31st of January 2023.

Like other monetary policy agencies around the world who are looking for means to curb the increase in inflation in their economies, the Central Bank of Nigeria resorted to incessant manipulations of monetary policy instruments to reduce the quantity of money in circulation in the country. The past meetings of the MPC have seen the CBN implement contractionary monetary policies. The monetary policy rate (MPR) has increased from 11.5 percent in the first four months of the year 13 percent and 14 percent between May and June and between July and August respectively. But with the continuous rise in inflation rate, the MPC raised the MPR to 15.5 percent in September and now to 16.5 percent in the last meeting held on the 21st and 22nd of November 2022 (See figure 2).
 

The contractionary measure was taken by the CBN in reaction to the increase in inflation rate which again rose to 21.09 percent in October, especially the food inflation which increased to 23.72 percent in October 2022, from 23.34 percent in September 2022 . The CBN noted that a contractionary policy would narrow the negative real effective interest margin and thus improve market sentiment and further restore investor confidence. It also believes that previous tightening stances would have led to the observed decline in the month-on-month inflation rate and could further curb the inflationary trend.  Thus, it decided to sustain the tightening stance to instigate a significant decline in inflation rate.

A tightening monetary policy or an increase in MPR means that the CBN has increased the rate at which it lends to commercial banks. The commercial banks in turn cannot sell below the cost price and/or forfeit its profits or interest. In view of this, the commercial banks will sell at a margin or at the market rate. Hence, this will lead to an increase in the cost of loans in the banks thereby discouraging lending. The lesser the quantity of money in circulation in the economy, the lesser the inflation. According to Milton Friedman, “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. This means that an increase in the quantity of money by a percent would as well lead to an increase in inflation by the same margin. The reverse is the case when the quantity of money in circulation is reduced by the same margin.

Inflation and Economic Agents
Inflation has different impacts on different economic agents. The fixed income earners, salaried workers, employees, teachers, pensioners, creditors, et., are the worst loser during inflation. This is because their incomes do not rise as much as the rise in commodities prices. Similarly, persons who live on past savings, fixed interest or rent, pensioners, government employees, teachers, etc., also suffer during periods of rising prices as their incomes remain fixed. Inflation thus reduces the purchasing power of this set of people, thereby affecting the profits of manufacturing firms. The erosion of real income is the single biggest outcome of inflation.

Inflation takes its toll on manufacturers through cost increases, contract constraints, labour shifts, and input issues, which in turn affects inventory and capital purchases. Inflation decreases customer purchases. This is because with less purchasing power and less money in the bank, consumers tend to buy less. Fewer consumers buy, less profit for companies. This leads to accumulation and increased inventory costs: When replacement inventory costs more than inventory sold, it can lead to an inventory shortage and a reduction in gross profit. Inflation also leads to the increased cost of service as well as transportation costs: During inflationary cycles, the cost of fuel and truck maintenance increases, putting more pressure on gross profit. During Inflation, the lag between employee wages and the inflation rate affects productivity and increases personnel turnover. This leads to decreased output, delayed deliveries, and lower invoicing. Inflation also leads to reduced borrowing and investment capacity.

Addressing Inflation in the Manufacturing Sector
As inflation leads to high prices for goods and shipping, manufacturers are forced to adjust and increase prices and budgets throughout the company to match inflation. In doing this companies have to consider what a customer is willing to pay, the cost of production, and the actual costs of the goods. In another way the manufacturers would need to cut costs to balance the necessary adjustment of price increases. This could be achieved by researching new suppliers and materials, while at the same time ensuring that they maintain quality.
 
One of the impacts of inflation in the manufacturing sector is that it leads to a decrease in manufacturing sector productivity. The manufacturing companies can work towards increasing productivity. This could be achieved using a limited workforce, thereby reducing the increased cost of production and offsetting the effects of inflation. Inaddition, productivity bonuses and measures proven to increase productivity should be Implemented to boost the remaining employees' productivity while keeping costs low. It is believed that implementing new technology would help reduce the costs of production. Automation and AI technology can help provide more control over operations and help to avoid costly human errors. Addressing inflation at the manufacturing level would help offset the inflation at the consumer level.

The inflation rate in Nigeria witnessed yet another upsurge in the month of September 2022. The year-on-year headline inflation rate rose to 20.77 per cent, this surpassed the 20.52 and 16.63 per cent recorded in August 2022 and September 2021 by 0.25 and 4.14 per cent respectively, indicating that the general price level was higher by 0.25 and 4.14 per cent than what obtained in the months of August 2022 and September 2021 respectively. On the month-on-month basis, the headline inflation declined from 1.77 per cent recorded in August, to 1.36 per cent in September 2022. This shows a drop in the general price level of 0.41 per cent in the month of September. The decline in the monthly inflation rate was a function of the decrease in food prices due to harvest season which reduced the scarcity of food items witnessed in the previous months. On the other hand, the increase in the yearly headline inflation rate is attributed to the disruption in the supply of food products, increase in the cost of importation arising from the persistent currency depreciation and the general increase in the cost of production.

In both the urban and the rural areas, there were increases in the headline inflation rate in the month of September. The urban centre recorded a 21.25 percent year-on-year inflation rate, while the rural area was 20.32 per cent. The above figures show that the general price level increased by 4.06 per cent from the 17.19 per cent recorded in the same month in 2021 in the urban areas, while the rural areas presented an appreciation of 4.24 per cent in the general price level from the 16.08 per cent inflation rate recorded in the same month in 2021. On a month-on-month basis, the urban centre headline inflation declined by 0.03 percent from 1.79 per cent recorded in the month of August to 1.46 per cent in the month under review. Similarly, the rural areas also witnessed a decline in the month-on-month inflation rate from 1.75 per cent recorded in August to 1.27 per cent in September 2022. This shows that the general price level declined by 0.48 per cent.

The decline in the month-on-month inflation as stated above is attributed to the decline in food inflation given the harvest season. According to the National Bureau of Statistics (NBS), the reduction in prices of some food items like tubers, garri, local rice and Vegetables, etc., caused the food inflation to drop from 1.98 per cent in August to 1.43 per cent, i.e., a 0.54 per cent fall in the monthly food inflation in the month of September 2022. This was not the case with the year-on-year food inflation which rose from 19.57 per cent in September 2021 to 23.34 per cent in the month under review. The 3.77 per cent rise in the headline inflation within the period is attributed to increases in the prices of bread and cereals, food products, potatoes, yam and other tuber, fish, meat, oil and fat.

The core inflation rate, which excludes the prices of volatile agricultural produce, also recorded increases. On a year-on-year basis, the increases in the prices of Gas, Liquid fuel, Solid fuel, Passenger transport by road, Passenger transport by Air, fuel and lubricants for personal transport equipment, Cleaning, Repair and Hire of clothing caused a significant increase in Inflation rate from 17.20 per cent in August 2021 to 17.60 per cent in the month of September 2022. This figure is also 3.86 per cent from 13.74 per cent recorded in the same month of September in 2021. On a month-on-month basis, the core inflation rate was 1.59 per cent, the same rate it was in August 2022. This shows that the prices of items under the core inflation remained the same as in August.

However, despite the insignificant increase in the core inflation rate in the month under review, the average price level has continued to soar leading to increases in general inflation rate. This has been the case for the past months. The rate of inflation in Nigeria has assumed an alarming dimension, and is eroding the purchasing power of consumers, thereby affecting the sales and revenue of manufacturers. Unfortunately, this may not abate in the coming months. With the campaigns for the generation elections going on, the amount of money that would be pushed out by politicians escalate the inflations and cause more hardships. It is important that while manufacturers rethink the sources of their raw materials locally and resize their products to packages that are affordable to consumers for affordability, consumers should prioritize their needs and remove frivolities.

The inflation rate in Nigeria witnessed yet another upsurge in the month of August 2022. The year-on-year headline inflation rate rose to 20.52 per cent, this surpassed the 19.64 and 17.01 per cent recorded in July 2022 and August 2021 by 0.88 and 3.52 per cent respectively, indicating that the general price level was higher by 0.88 and 3.52 per cent than what obtained in the months of July 2022 and August 2011 respectively. On the month-on-month basis, the headline inflation declined from 1.82 per cent recorded in July, to 1.77 per cent in August 2022. This shows a drop in the general price level of 0.05 per cent in the month of August. The decline in the monthly inflation rate was a function of the decrease in food prices due to harvest season which reduced the scarcity of food items witnessed in the previous months. On the other hand, the increase in the yearly headline inflation rate is attributed to the disruption in the supply of food products, increase in the cost of importation arising from the persistent currency depreciation and the general increase in the cost of production.

In both the urban and the rural areas, there were increases in the headline inflation rate in the month of August. The urban centre recorded a 20.95 percent inflation rate in year-on-year inflation, while the rural area was 20.12 per cent. The above figures show that the general price level increase by 3.36 per cent from the 17.59 per cent recorded in the same month in 2021 in the urban areas, while the rural areas presented an appreciation of 3.69 per cent in the general price level from the 16.43 per cent inflation rate recorded in the rural areas in the same month in 2021. On a month-on-month basis, the urban centre headline inflation declined by 0.03 percent from 1.82 per cent recorded in the month of July to 1.79 per cent in the month under review. Similarly, the rural areas also witnessed a decline in the month-on-month inflation rate from 1.81 per cent recorded in July to 1.75 per cent in August 2022. This shows that the general price level declined by 0.06 per cent.

The decline in the month-on-month inflation as stated above is attributed to the decline in food inflation given the harvest season. According to the National Bureau of Statistics (NBS), the reduction in prices of some food items like tubers, garri, local rice and Vegetables, etc., caused the food inflation to drop from 2.04 per cent in July to 1.98 per cent in August 2022. This was not the case with the year-on-year food inflation which rose from 20.30 per cent in August to 23.12 per cent in the month under review. The 2.82 per cent rise in the headline inflation within the period is attributed to increases in the prices of bread and cereals, food product, potatoes, yam and other tuber, fish, meat, oil and fat.

The core inflation rate, which excludes the prices of volatile agricultural produce, also recorded increases. On a year-on-year basis, the increases in the prices of Gas, Liquid fuel, Solid fuel, Passenger transport by road, Passenger transport by Air, fuel and lubricants for personal transport equipment, Cleaning, Repair and Hire of clothing caused a significant increase in inflation rate from o 13.41 per cent in August 2021 to 17.20 per cent in the same month in 2022. On a month-on-month basis, the core inflation rate was 1.59 per cent in August 2022. This shows that the prices of items under the core inflation reduced by 0.17 per cent when compared to 1.75 per cent recorded in July 2022.

However, the reduction in the rate of increase in inflation could not impact the price of other products, hence total inflation also increased. The rate of inflation in Nigeria has assumed an alarming dimension. There is no month past without an increase in the rate of inflation. This increase in inflation is eroding the purchasing power of consumers, and this eventually would affect their ability to purchase as well as the sales and revenue of manufacturers. It is important that while manufacturers rethink the sources of their raw materials locally, they also should resize their products to packages that are affordable to consumers.

Despite the rising inflation and the dwindling capital importation, the Nigerian economy has continued to grow in the current fiscal year. The real Gross Domestic Product (GDP) grew by 3.54 per cent (year-on-year) in the second quarter of 2022, higher by 0.43 per cent points than 3.11 per cent recorded in the first quarter of 2022. When compared with the same quarter of 2021, it recorded contraction of 1.47 per cent points from 5.01 per cent growth rate recorded in the same quarter of 2021. If this is witnessed in the next quarter, Nigeria may as well be seen as having gone into its third recession in the recent time.

In nominal terms, with a year-on-year nominal growth rate of 15.03 per cent, the Nigerian GDP has grown to N45,004,520.89 million, higher than N39,123,713.32 million or 14.99 per cent growth recorded in the same quarter in 2021. This growth rate also supersedes the 13.25 per cent nominal growth recorded in the first quarter of 2022.

The Nigerian GDP growth is majorly composed of the nonoil sector which contributed 93.7 percent against the oil sector which brought in only about 6.3 per cent of the entire composition. This nonoil growth rate is higher than about 93.4 per cent witnessed in the previous quarter of this year, this is also higher than 92.6 per cent recorded in the same quarter of 2021. The oil sector’s contribution to GDP for this quarter on the other hand showed a depreciation of 1.1 per cent point from 7.42 recorded in the same quarter of the last fiscal year. The dwindling contribution of the oil sector to GDP is attributed to the contraction in the barrels of oil produced per day in the country. The barrel of oil produced per day reduced from 1.61 million barrels per day (mbpd) recorded in the same quarter of 2021 and 1.49 mbpd produced in the preceding quarter in 2022 to 1.43 mbpd. All these are also lower than the OPEC approved 1.830 million barrels per day quota for Nigeria.

Despite constituting the greatest percentage of the GDP in the quarter under review, the non-oil sector growth rate of 4.77 per cent was lower in real terms by 1.97 per cent points and 1.31 per cent points when compared to the rates recorded in the same quarter of 2021 (6.74 per cent) and the first quarter of 2022 (6.08 per cent). The sector’s growth in the second quarter was driven mainly by Information and Communication (Telecommunication); Trade; Financial and Insurance (Financial Institutions); Transportation (Road Transport); Agriculture (Crop Production; Livestock) and Manufacturing (Food, Beverage & Tobacco; Chemical and  Pharmaceutical Products), which contributed highest percentages of 7.71, 4.51, 20.06, 56.38, 1.54, 2.87, 5.11 and 9.29 per cents respectively to the different sectors leading to the positive GDP growth rate.

The Nigerian economy is still a services-based economy. The services sector contributed 57.35 per cent to the GDP in the second quarter under review, an improvement by 1.18 per cent point from 56.17 per cent recorded in the first quarter of 2022 and 1.70 per cent points from 55.66 recorded in the same quarter in 2021. The contribution of the agricultural sector, like the service sector also increased from 23.78 and 22.36 per cents recorded in the same quarter in 2021 and the first quarter of 2022 to23.24vper cent in the quarter under review. The industrial sector on the other hand showed declines by 2.06 and 1.16 per cent points from 19.40 and 20.57 per cents in the previous quarter of 2022 and the same quarter in 2021. The industrial sector has witnessed closure of many businesses, increase in the cost of importation of intermediate products because of inflation and dearth of foreign exchange and insecurity witnessed in many parts of the country, these would have been responsible for the increases in the cost of production decline in the sector’s revenue and its contribution to GDP in the quarter under review.

There is therefore the need for manufacturers to begin to source for raw materials locally. Issues of multiple taxes should be addressed to reduce the cost of production, while the monetary authority should find a way to address the issue of lack of exchange rate either to repatriate profits by foreign investors or to import the necessary inputs to production by investors. These would help the address the identified issues and boost the sector’s contribution to the economy.

The continuous rise in inflation in the Nigerian economy since the beginning of this year has become a source of worry to every person living in the country. On a year-on-year basis in the month of July, the headline inflation rate increased to 19.64 per cent from 18.60 per cent recorded in the month of June this year. This is also higher than 17.38 per cent in the same month in 2021. By implication, the general price level rose by 1.04 per cent and 2.26 per cent higher than in June 2022 and July 2021 respectively. On a month by monthly basis, the inflation rate increased by approximately the same rate as it did in the month of June 2022. The rate of increase of the headline inflation rate was 1.82 per cent in July 2022.

In both the urban and the rural areas, the increase in year-on-year inflation rate was significant. The urban centre recorded 20.09 percent in inflation rate in July. This is 2.08 per cent higher than 18.01 per cent recorded in the same month in 2021 and 1.0 per cent higher than 19.09 recorded in June 2022. On the monthly basis, the change in inflation was about the same figure (1.82 per cent) recorded in the month of June 2022. The rural are also moved from 16.75 per cent recorded in July 2021 and 18.13 per cent in June 2022 to 19.22 per cent year-on-year in July 2022. These amount to 2.47 per cent and 1.09 per cent in the two periods, respectively. Like the urban centre, the monthly inflation rate increased at the same rate in did in the previous month of June 2022.

The Nigerian inflation is increasing in all angles, there are significant rises in both food and core inflation rates. The food inflation rate rose to 22.02 per cent on a year-on-year basis in the month of July compared to 21.03 per cent in the same month in 2021 and 20.60 per cent in June 2022. The rise in food inflation on a month-on-month basis in the July is 2.04 per cent, this was an insignificant decline from 2.05 recorded in the month of June 2022. The National Bureau of Statistics (NBS) recorded that the decline in This decline in the prices of some food items such as tubers, maize, garri, vegetables, were instrumental to insignificant reduction in food inflation in the month under review.

The core inflation rate which excludes the prices of food items also recorded increases. On a year-on-year basis, the increases in the prices of Gas, Liquid fuel, Solid fuel, Passenger transport by road, Passenger transport by Air, Garments, Cleaning, Repair and Hire of clothing caused a significant increase in inflation rate from 13.72 per cent in July 2021 and 15.75 per cent in June 2022 to 16.26 per cent in the month of July 2022. The monthly inflation rate in July was 1.75 per cent and this figure was higher than 1.56 per cent in the month of June 2022.

The rate of inflation in Nigeria has assumed an alarming dimension. There is no month past without an increase in the rate of inflation. With these increases, the purchasing power of consumers is also declining, and this eventually would affect the sales and revenue of manufacturers. It is important that while manufacturers rethink to sources of their raw materials locally, they also should resize their products to packages that are affordable to consumers.

The world is presently confronted with heightened macroeconomic uncertainties including broad based inflation across countries. This is compounded by the ongoing Russian-Ukraine war, and a backlash from a wide range of sanctions imposed on Russia, which has contributed to the disruptions to the global supply chain thereby distorting full recovery from the COVID-19 engineered recession. The result is the high global inflationary trend witnessed presently in many countries. In Nigeria, there is persistent uptick in inflation rate. from January, inflation rate has moved from 15.60 percent to 15.92 percent in March and 18.60 per cent in the month of June (See figure 1 below). This trend has affected both the urban and rural areas, with a rise in both food and core inflation to 20.6% and 15.75 percent in June 2022 from 19.5 percent and from 14.9 percent, respectively in May. The MPC also noted that there was a significant increase in broad money supply (M3) from 10.86 per cent in May to 11.52 per cent in June 2022, caused by the growth in Net Domestic Assets (NDA).

The inflationary pressure has led to further increases in the cost of raw materials for consumer goods which rose by 40 per cent in 2021 from 2020, without a significant impact on the profitability of producers. Similarly, the growing inflation is eroding the purchasing power of Nigerians, as most Nigerians are no longer able to afford major expenditure on discretionary or non-essential goods and services. In a bid to curtail this uptick in inflationary rate which has persisted since the beginning of the year in Nigeria, the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) in its 286th Meeting which held between Monday, July 18, and Tuesday, July 19, 2022, resolved and increased the Monetary policy Rate (MPR) by 100 basis points, from 13.0 per cent to 14.0 per cent. This is the second time the MPC is increasing the MPR in the year, In May, MPR was raised to 13.0 per cent. However, the MPR retained the asymmetric corridor at +100/-700 basis points around the MPR; the CRR at 27.5 per cent; and the Liquidity Ratio at 30 per cent.

The committee adopted this contractionary policy (increased MPR) to cob the aggressive increase in inflation and halt its negative impact on the purchasing power of the poor, as well as retarding growth. Another reason was to narrow the negative real interest rate gap, with a view to sending a signal of the CBN’s strong determination to aggressively defend its price stability mandate while portraying its sensitivity to the impact of inflation on the disposable income of vulnerable households. The choice not to loosen was to avoid worsening the existing liquidity condition in the economy which could further dampen money market rate, necessary to stimulate savings and investment. Similarly, retaining the policy rate would have portrayed the bank’s insensitivity to both the global and domestic price development, and the aggressive inflationary trend.

Nigerian inflation rate is on the increase as June 2022 inflation rate rises to 18.6% from 17.71 per cent and 17.75 per cent recorded in the month of May 2022 and in the same month in 2021, respectively. This means that all items inflation year-on rose by 0.88 and 0.84 per cent points respectively, between June and July 2022 and the same period in 2022. In other words, inflation rate increased in June 2022 more than the two previous months. The June inflation rate is the highest in the last twelve months. It also marks the fifth consecutive time inflation rate has increased in Nigeria since it dropped to 15.60 percent in January 2022 from 16.63 per cent recorded in December 2021 (See figure below). On a month-on-month basis, the NBS reported that the headline inflation rate increased to 1.82 per cent in June 2022 from 1.87 per cent recorded in May this year.

The inflation affected all items in both the urban and rural areas. While the urban inflation rate increased to 19.09 percent (year-on-year) from 18.24 percent in May, the rural inflation rate increased to 18.13 percent in June 2022 (year-on-year) from 17.21 per cent recorded in May this year too. These rates are also higher than the rates in the same month in the previous year. The urban and rural inflation rates were 18.35 per cent and 17.16 percent respectively. The urban inflation has continuously surpassed the rural inflation by an average of 1 percent. This may be attributed to urbanization and concentration of the population in the urban centres which has led to hike in demand and subsequently prices of goods.

Similarly, food inflation has been on the rise, rising to 20.6% in June 2022 from 19.5 percent recorded in May 2022. The rise in the food index was caused by the increases in the prices of bread and cereals, food products, potatoes, yam, and other tubers, meat, fish, oil and fat, and wine. The rate of changes in food prices compared to the same period last year was higher. The report shows that the rate of changes in food prices compared to the same period last year was higher. Core inflation on the other hand increased to 15.75 percent from 14.9 percent recorded in the previous month. This is an increase of about 0.85 percent points. In the last month, the rise in the prices of gas, liquid fuel, solid fuel, garments, passenger transport by road, cleaning, repair and hire of clothing, and passenger travel by air, were obvious.

In their last monetary policy meeting, the CBN has emphasized that the present inflationary trend is global, resulting from the Russia and Ukraine war, and the disruption in the supply chain as COC+VID-19 continues to ravage part of China and other economic powerhouse of the world. The Nigerian case is compounded by the terrorist activities by boko haram and other sects ravaging, especially part of Norther Nigeria. An end to these issues is not still in sight, meaning that the situation may persist. Hence, the need for economic units to program their activities and finances for efficiency. While manufacturers should continue to package their products in affordable sizes, consumers should prioritize their needs and dispense with frivolities. This is not a time to purchase what is not needed.