The Centre for the Promotion of Private Enterprises (CPPE) has urged the Central Bank of Nigeria (CBN) to pause deployment of monetary tightening tools, saying the Nigerian economy is not a credit driven economy which is why the tightening outcomes have been inconsequential to tame inflation.
Nigeria’s inflation rate rose for the 10th consecutive month in November to 21.47 per cent from 21.09 per cent recorded a month earlier amid a continuing increase in food and energy prices, according to the National Bureau of Statistics. The statistics office said the prices of goods and services, measured by the Consumer Price Index, increased by 21.47 per cent in November 2022 compared to the rate in November 2021.
The figure is 6.07 per cent points higher than the rate recorded in November 2021.
Reacting, CEO of the centre, Dr Muda Yusuf, noted that inflation had been spiking despite the serial monetary tightening, noting that sustained tightening penalises entrepreneurs, especially the real sector, increases cost of credit with heightened prospects of a backlash on growth. He advised that inflation restraining strategies should accordingly focus on productivity boosting supply side factors and reduction in ways and means funding of deficit. “Taming inflation demands urgent government intervention to fix supply side constraints in the economy. Tackling production and productivity constraints, fixing the dysfunctional forex policy and reducing liquidity injection through ways and means funding of fiscal deficit.
Meanwhile, the CBN should resist the temptation of further monetary policy tightening.
“Over the last one year, the Nigeria inflation story has been a depressing one as reflected in the dynamics of all key price metrics,” the CPPE said.
“The key inflation drivers have not changed over the last few years. They include the following: the depreciating exchange rate, rising transportation costs, logistics challenges, forex market illiquidity, hike in diesel cost, climate change, insecurity ravaging farming communities and structural constraints to economic activities. Fiscal deficit financing by the CBN is also a significant factor fueling inflation through high liquidity injection into the economy.”