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Home Opinions Blurb

Inflation: Emefiele Sets Nigeria On The Path To Zimbabwe

Editor by Editor
April 12, 2016
in Blurb, Spotlight
CBN Gov Godiwn Emefiele
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When you are a Central Bank Governor and you fail in all your major mandates (inflation, growth and currency management) it means you have lost credibility and probably not fit to be at the helms.

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Nigeria’s CBN and its merry gang of monetary policy committee (MPC) members or academicians as we call them have managed to fail at every single mandate expected of the Central Bank.

Inflation at 12.8% is way above trend; growth is below trend at 2 percent for 2015, while the Naira exchange rate has surged to hitherto uncharted territory of N320 per dollar.

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Data being gathered and analysed by Nairametrics shows that growth in Q1 2016 may also actually come in below 2 percent.

The CBN last year rolled out a series of policies that have made the macro story for Nigeria worse than it should be.

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The bank cut rates instead of hiking rates in the face of fast rising inflation expectations, chose to pump liquidity into the commercial banks (via a CRR cut)  for them to lend in areas chosen by the CBN in a command and control policy reminiscent of North Korea and Venezuela.

The CBN however forgot that banks were naturally and rightfully cautious on extending new credit in a period of rising bad loans and mostly shunned the offer.

The biggest policy mistake of Emefiele and his merry gang of MPC pretenders however was to attempt to artificially hold the Naira/Dollar rate at N199 per $1, even when it didn’t have the firepower to defend such an overvalued level.

This invariably has led to shortages of dollars, a spike of the black market dollar rate , and the current runaway inflation we are seeing.

“Food prices rose 12.7 percent in March from a year ago, compared with 11.4 percent in the previous month, driven up by transportation costs, the planting season and foreign-exchange movements,” the National Bureau of Statistics (NBS) said in its Inflation report released today.

The main takeaway from all these is that we have a CBN that is increasingly out of touch and pushing Nigeria gradually onto the path to Zimbabwe and hyperinflation.

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