Article Summary
- Experts urged CBN to focus its attention on the cost-push factors as they drive inflation.
- The apex bank needed to also know that the negative consequences of its naira redesign and cashless policies were still affecting the inflation rate.
- The repeated rate hike has further stifled access to credit for Micro Small and Medium-sized Enterprises.
Some Economists have advised the Central Bank of Nigeria (CBN) to focus more on the supply side or cost push factors and structural issues fueling inflation in the country.
The experts made the call in Lagos following the rising rate of inflation in the country.
They noted that the repeated interest rate hikes had done little to stop the upward trend in inflation.
Nairametrics reported that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria increased its benchmark interest rate (MPR) for the third time this year by 50 basis points to 18.5% in its recently concluded MPC meeting.
The decision of the CBN is made on the back of the rising inflation rate in the Nigerian economy. Headline inflation rose to 22.22% in April 2023 from 22.04% recorded in the previous month, representing its highest level since September 2005.
What the CBN should focus on
Director, Centre for Economic Policy Analysis and Research, University of Lagos, Prof. Ndubisi Nwokoma, advised CBN to focus its attention on the cost-push factors as they drive inflation.
- “On the increase in the MPR, I think the CBN is still battling with the inflation issue, which is proper.
- “The CBN should focus more on the cost-push factors of inflation, like the increased costs of production due to supply chain disruptions, exchange rate instability as well as increased price expectations due to the country’s fiscal challenges,’ he said.
Nwokoma, however, said the apex bank needed to also know that the negative consequences of its naira redesign and cashless policies, were still affecting the inflation rate, as they had not significantly moderated since cash became more available after the crisis, earlier in the year.
In addition, a Professor of Finance and Capital market at Nasarawa State University, Keffi, Uchenna Uwaleke, said that the hike in MPR to 18.5% was not in the interest of output growth.
According to him, the repeated rate hike has further stifled access to credit for Micro Small, and Medium-sized Enterprises.
- “Besides, it may do little to halt the upward trend in inflation as recent experience has shown.
- “Any significant moderation in the inflation rate can only come from dealing with supply side factors and structural issues fueling rising prices such as insecurity, electricity, and fuel challenges,’’ he said
