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Stop tightening monetary tools, experts caution CBN

The Central Bank’s measures to tighten Nigeria’s monetary policy tools have been ineffective in stemming the tide of rising inflation, some experts said, advising the apex bank to review its strategies.

Dr Muda Yusuf, founder, Centre for the Promotion of Private Enterprises (CPPE), advised the CBN to resist the urge to further tighten the country’s monetary policy tools.

Mr Yusuf said this while reacting to the November inflation rate of 21.47 per cent as released by the National Bureau of Statistics (NBS) on Thursday in Lagos.

Headline inflation accelerated to 21.47 per cent in November as against 21.09 per cent in October.

On a month-on-month basis, food inflation grew by 1.4 per cent compared to 1.23 per cent in October, while core inflation similarly increased to 18.24 per cent from 17.76 per cent in October.

Mr Yusuf said deployment of monetary tightening tools should be put on hold because the Nigerian economy is not a credit driven economy.

This, he explained, was why the outcomes of previous deployments had been inconsequential in taming inflation.

Mr Yusuf stated that as at October, credit to the private sector as a percentage of Gross Domestic Product (GDP) was 22.7 per cent in Nigeria.

He noted that the figure was 32 per cent in Kenya; 96 per cent in Morocco; 193 per cent in Japan; 143 per cent in the United Kingdom; 216 per cent in the United States; and 39 per cent was average for sub-Sahara Africa.

“This underscores the need for variability in policy response.

“Inflation had been spiking in spite of the serial monetary tightening.

“Sustained tightening penalises entrepreneurs (especially the real sector), increases 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.

Also, Segun Kuti-George, former Chairman, Nigerian Association of Small Scale Industrialists (NASSI), noted that the inflation rates did not reflect current realities.

According to him, inflation in Nigeria cannot be less than 50 per cent, seeing that with each passing day, the prices of items soar.

Mr Kuti-George attributed the country’s inflationary pressures to its dependence on exports for production and consumption which in turn put pressure on the naira and devalued it.

He stressed the need to support the manufacturing sector more by creating a special funding window not just for big organisations but for very small businesses.

“Small and Medium Enterprises (SMEs) in Nigeria are about 90 per cent, accounting for the majority of the employment.

“Windows must be opened to small businesses with the issue of collateral deemphasised as we need to take more risks for our people.

“There’s also a need to create more grants than loans to give start ups the soft takeoff required to produce more, create more, employ more and grow the economy,” he said.

He also stressed the need for the reorientation of Nigerians to drive the acceptability of made-in-Nigeria goods and services. 

(NAN)

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