Expert advises against continued monetary policy tightening 

By Idris Bakare

The Central Bank of Nigeria (CBN) has been advised to withdraw from further deployment of monetary policy tightening as a tool to check the inflationary pressure.

The Managing Director, Centre for the Promotion of Private Enterprise (CPPE) made the call in response to the November 2022 inflation figure released by the National Bureau of Statistics (NBS) last Thursday, which showed that the headline inflation accelerated to 21.47 per cent in November as against 21.09 per cent in October, while the food inflation rose to 24.13 per cent from 23.72 per cent in October.

He observed that the Nigerian economy is not credit-driven, arguing that it accounts for the reason the tightening outcomes has been inconsequential as a tool to tame inflation.

He stated, “As at October, 2022, credit to the private sector as a percentage of GDP was 22.7 per cent in Nigeria. The percentages for other countries in 2020 according to the World Bank were 32 per cent in Kenya; 96 per cent in Morocco; 193 per cent in Japan; 143 per cent in the UK; 216 percent in the United States; and 39 per cent was the average for sub-Saharan Africa. This underscores the need for variabilities in policy responses. Inflation has been spiking despite the serial monetary tightening.”

He argued that sustained tightening penalizes entrepreneurs (especially the real sector),and increases the cost of credit with heightened prospects of a backlash on growth.

“Inflation restraining strategies should accordingly focus on productivity boosting supply side factors and reduction in ways and means funding of deficit,” he said.