The Central Bank of Nigeria has again justified its reliance on the Loan Deposit Ratio to control the country’s rising inflation.

The apex bank also said it is ready to do whatever it takes to reduce the inflation rate.

The CBN’s Acting Director of the Banking Supervision Department, Dr Adetona Adedeji, disclosed this in ‘CBN Talk Today,’ a podcast recently uploaded to the bank’s website titled “Loan to Deposit Ratio Adjustment.”

Recall that CBN reduced the LDR of banks from the previous 65 percent to 50 percent, a move the regulator said would stabilise the economy.

Adedeji said the use of LDR as a control measure for inflation started in 2019 when it was observed there was a massive slowdown in credit growth.

“This policy was created to ensure that money flows into the real sector of the economy. The LDR then was set at 60 percent, and later increased to 65 percent before it was last week reduced to 50 percent. And if you want to combat inflation using the orthodox method, you need to balance what you do with the monetary policy tools and other measures,” he said.

Speaking about the nexus between the LDR and rising inflation, he said the last Monetary Policy Committee decided to purge the financial system of excess cash by raising the Monetary Policy Rate.

At the last MPC, the bank raised the MPR by 200 basis points to 24.75 percent from 22.75 percent; and adjusted the asymmetric corridor around the MPR to +100/-300 basis points.

He explained that although the MPC decision limited the ability of bank customers to take loans and reduce the volume of loans accessed by borrowers, it also limited the volume of cash in circulation, a move he noted is good for the financial health of the country noting that any policy that enables banks to lend more, will indirectly increase the money supply and raise the inflation rate.

“There is an inverse relationship between loan-to-deposit ratio, monetary policy rate, and cash reserve ratio. If you are going contractionary, you have to increase both the Monetary Policy Ratio and Cash Reserve Ratio. But to achieve your results further, what you need is to reduce the LDR to control inflation, and that was what the CBN did,” he said.

Explaining further, he said that when the money supply is reduced, the interest rate will also go up.

The contractionary measure of the CBN means that it wants to reduce money supply. And when an economy is experiencing inflationary pressure as it is currently with Nigeria, it is the duty of the apex bank to ensure price stability.

“To achieve this, the apex bank uses diverse means including the option of adjusting the money supply, the best option is to bring down the LDR to ensure that banks’ ability to lend more to the economy and circulate more cash is reduced,” he said.

While acknowledging the adverse effects of the policy, Adedeji said there must be a tradeoff for the economy to move forward.

If you look at the traditional Phillips curve, it says you cannot fight two things at the same time, there could be a trade-off. If you are fighting inflation, you cannot fight unemployment at the same time.

“The Phillips curve states that inflation and unemployment have an inverse relationship. Higher inflation is associated with lower unemployment and vice versa. Even if you are going to fight it, it will not be at the desired level.

“So, you have to choose either to fight inflation or unemployment. Both are key macroeconomic objectives that are very critical to the development of the economy,” he stated.

He said that looking at other economies suffering from high inflation rates, the best thing to do at this time is tracking inflation rather than looking at economic growth at this time.

“We will continue to fight inflation, and when we bring inflation down, we will start talking of economic growth,” he said.

The National Bureau of Statistics reported that in March, the country’s inflation rate rose to an all-time high in the first quarter of the year, at 33.2, which is higher than 31.70 percent in February and 29.90 percent in January.

The apex bank listed key drivers of inflationary pressure as the strong exchange rate pass-through to domestic prices, the high cost of energy and other production inputs, lingering insecurity, especially in food-producing areas, and legacy infrastructure deficits.

He said the CBN is committed to ensuring that the inflation rate in the country drops using the right monetary policy tools, adding that the current LDR is aligned with the CBN’s current monetary tightening plan.

The National Union of Market Traders Employers of Nigeria (NUMTEN) has pledged  to end illegal price fixing and exploitation in Nigerian markets.

NUMTEN President, Mr James Chukwuma, made the pledge while receiving the union’s Certificate of Registration from the Nigeria Labour Congress (NLC), on Wednesday in Abuja.

NUMTEN is the newest affiliate of the NLC.

Chukwuma said that the unstable market prices were worrisome to Nigerians and one of the objectives of the union is to ensure market reform.

“We are going to work with the market traders, distributors, manufacturers and even government to ensure that prices are regulated,” he said

He added that the union would protect traders from persistent exploitation and victimisation by unscrupulous elements hiding under the garb of the government.

According to Chukwuma,  NUMTEN was registered to liberate helpless market traders from persistent intimidation and extortion in the hands of illegal market associations.

“This unlawful act perpetrated by these illegal impostors have caused grievous bodily harm to the market traders, with people losing their life on a daily basis on the account of the encounters

“The idea is to tackle all the identified challenges, including, non-conducive trading environment, unrealistic business profit, unstable market prices, incessant loss of properties in the market from fire outbreak,” he said.

Chukwuma said that NUMTEN is a symbol of hope to salvage government revenue being siphoned by minority individual and illegitimate associations.

He said the union would ensure that the right revenue goes into the government purse, and the labour of its members would not be in vain any longer.

NUMTEN president also promised to enter into collaboration with other sister unions and government agencies, to ensure Nigeria becomes a productive and not consuming nation.

“We will ensure that Nigeria becomes an industrialised nation producing finished goods for consumption by other nations in the world,” he said.

NLC Head of Information, Mr Benson Upah, urged the union to be up and doing and prioritise workers’ welfare.

The House of Representatives Minority Caucus has called for a new minimum wage and a better working condition for Nigerian workers.

Rep. Kingsley Chinda, the House Minority Leader, stated this in a statement to mark the 2024 Workers Day in Abuja.

“Today, as we celebrate the resilience and contributions of Nigerian workers, the backbone of our nation’s development, we stand in unwavering solidarity with Nigerian workers across all sectors and facets, acknowledging their tireless efforts and sacrifices.

“Today is a poignant reminder of the invaluable contributions of workers to our nation’s growth and prosperity.

“As we mark this Workers’ Day, and honour the contributions of workers, let us recognise the challenges faced by workers, including poor working conditions, inadequate remuneration, and erosion of workers’ rights.

“Let us reaffirm our collective responsibility to advocate for a fairer, more inclusive society where every worker is treated with dignity and respect,” he said.

Chinda added: “We call on the government to urgently consider a living wage for the Nigerian worker and commence implementation with the same speed used for the implementation of tax and tariff increases on the populace.”

He reiterated the commitment of the caucus to addressing these issues through legislative actions and advocacy.

He said that the minority leadership had resolved not only to reflect on the pressing issues facing the Nigerian workforce but to act and prioritise the welfare and rights of workers.

“Just as we have commenced the drive for a living wage for Nigerian workers against the minimum wage offered by the government.

“We urge the government to prioritise policies that promote decent work, social protection, and fair labour standards.

“We demand an end to the exploitation of workers and the promotion of equal opportunities for all,” he said.

The lawmaker said that the resilience, dedication, and sacrifices of Nigerian workers cannot be overstated and should not be taken for granted.

Chinda congratulated the Nigerian workforce saying that their labour builds the nation and the caucus honours their contributions.