The Federal Government has admitted that its temporary closure of land borders was responsible for the current rising inflation in the country, but insists the closure would remain in place until the country’s neighbours learnt to respect trade protocols.
The FG said it had to close borders because Nigeria could not continue to subsidise economies of her neighbours.
Since the border closure, headline inflation rose to 11.61 per cent as of October from the 11.24 per cent recorded in September.
On Wednesday, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, told State House correspondents that inflation rose due to hikes in food prices arising from the closure of the borders.
Responding to questions after Wednesday’s Federal Executive Council meeting, the minister stated that the border closure was a temporary measure adopted by the government to protect the economy against trade malpractices by neighbouring countries and would be reopened when all of Nigeria’s demands were met.
“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 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.”
Ahmed insisted that the government had little choice but to shut the borders else Nigerians would suffer the economic consequences, especially now that the African Continental Free Trade Area Agreement was coming into effect.
“What we are doing is important for our economy. We signed up to the 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”, the minister added.