IMPACT OF MONETARY POLICY RATE ON FOOD INFLATION IN NIGERIA (1990-2024)

Food inflation poses a significant and multifaceted challenges in Nigeria, with widespread and severe implications for the population. In this response, this study examines the influence of the monetary policy rate on food inflation, considering the numerous policy changes from 1990-2024. Food inflation serves as the dependent variable, while the independent variables include the monetary policy rate, exchange rate, treasury bill rate, and agricultural productivity. Using the Autoregressive Distributed Lag (ARDL) technique, the short run analysis reveal that only agricultural productivity has a significant impact on food inflation, thou it exhibits a negative relationship. In the long run, the ARDL results show that agricultural productivity and treasury bill rate have a negative relationship on food inflation and have no significant impact on food inflation. Monetary policy rate exhibits positive relationship but have no significant impact on food inflation. Exchange rate exhibits a positive relationship and has significant impact on food inflation. Based on these findings, the study suggests that the central bank of Nigeria should not utilize the monetary policy rate as a long term and short-term tool to manage food inflation. It is also imperative for the federal government to enhance agricultural productivity by improving security in key food producing regions and reducing dependence on food imports through the promotion of local production. The government should manage exchange rate volatility to reduce long term inflation.