Nigeria’s Central Bank Governor Godwin Emefiele is projecting that inflation rate in Nigeria will continue to drop due to the policies of the Central Bank of Nigeria. Mr. Emefiele made this remark in his section of the July notes of members of the monetary policy committee of the Central Bank of Nigeria.
Slow disinflation: Nigeria’s headline inflation rate has moderated from as high as 18.7% in January 2017 to 11.08% in July, the slowest rise in about 43 months. Inflation rate also declined to 11.2%in June 2019 from 11.4% in May 2019. The CBN Governor believes Nigeria’s inflation rate will continue to drop in the coming months but still not below its projected 6-9%.
It’s our policies: A boisterous Godwin Emefiele did not hesitate to attribute the projected drop in the rise in inflation to policies of the Central Bank.
“Near-term inflation outlook suggests continued modest disinflation by end-2019, albeit above the CBN’s 6–9 percent tolerance range. The projected disinflation is attributed to the CBN’s intervention in the agricultural sector, imminent harvest season, and continued stability in the FX market.” Emefiele
The Central Bank Governor also insisted that to address any supply-side inflation due to factors like electricity, transport bottlenecks and other factors of production. To this, he claims the Apex bank will rely on “local productivity with a view to driving inflation towards target.”
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What this means: The Central Bank’s plethora of policies under Emefiele has often been focused at development economics and forex restrictions. Under development economics, the CBN prefers to channels funds directly into the critical sector of the economy by issuing concessionary loans and grants as well as controlling the supply and utilization of forex. Once again he believes his interventionist policies are actually the reason for the drop in inflation giving him more impetus to double down on the controversial policies.
The Big Picture: Godwin Emefiel’s policy of banning forex for all items on the 41 list including more recently milk, is all geared towards stimulating local production as he insists. But critics believe strongly that this is more about hoarding the forex reserves than actually encouraging local production. The CBN has spent over N6 trillion on extra-budgetary loans to the Federal Government and over N5.8 trillion in debt notes from AMCON (as at May 2019).