By Chinwendu Obienyi
Members of the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) have expressed their concerns over the complex challenges facing Nigeria’s economy and the importance of implementing comprehensive strategies that address issues such as inflation, exchange rate stability, debt management, competitiveness, and inclusive growth.
The officials expressed their concerns in their personal statements as contained in the communique of the last CBN MPC meeting which held in March.
The committee unanimously voted to increase the Monetary Policy Rate (MPR) by 200 basis points to 24.75 per cent, to address the nation’s rising inflation.
The nation’s inflation rate, according to data published by the National Bureau of Statistics (NBS) revealed that headline inflation rate increased to 33.20 per cent, relative to the headline inflation rate in February 2024, which was 31.70 percent.
Furthermore, the bureau office stated that food inflation was 40.01 percent in March 2024. Explaining how food prices pushed inflation up in March 2024, the NBS said, “The Food inflation rate in March 2024 was 40.01 per cent on a year-on-year basis, which was 15.56 per cent higher compared to 24.45 per cent recorded in March 2023.
The CBN committee whilst attributing the development to disruptions to the global supply chain, prevailing global inflationary pressures, attack on Israel by Hamas, burgeoning debt profile amongst others, emphasized the importance of price stability and suggests maintaining a monetary tightening regime to combat inflation and stabilise the exchange rate.
Highlighting the detrimental effects of inflation and exchange rate fluctuations on the Nigerian economy, Bamidele Amoo, who doubles as member of the MPC and Managing Director, EcoDonini Solutions Limited, stressed the need for continued monetary tightening to achieve positive real policy interest rates and attract investment capital.
In fact, the negativity in the real values of our financial rates must be reduced if it cannot be eliminated now. Our short-term goal is to attain a positive real policy interest rate soon. It is therefore imperative that the current monetary tightening regime which commenced at the February 2024 meeting of the MPC, should continue, to allow complete policy pass-through in the Nigerian economy.
Given the above developments, and since Nigeria is competing for investment capital with comparable EMDEs such as Egypt, Ghana Kenya and others, there is a compelling need to further move the policy rate slightly upwards. Towards this end, all possible legal inflows – whether “hot, cold or warm” – should be explored and attracted into our carefully managed reserves”.
Amoo further suggested hikes in the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) to moderate inflation and maintain liquidity in productive sectors, while also calling for stricter regulation of banks to ensure they contribute effectively to economic growth.
He said, “more collaboration with the fiscal authorities is inevitable to restore macroeconomic balance through achieving price stability and sustainable economic growth. There is also a need for increased education and enlightenment to promote ethical behaviour by people and leaders to ensure transparency and accountability across sectors”.
For his part, Professor Murtala Sagagi, raised concerns about Nigeria’s growing debt burden and suggests the formulation of effective debt management strategies to mitigate risks associated with high debt service-to-revenue ratios.
“With increasing debt stock and debt services obligations (Debt Service-to-Revenue ratio) reaching 179.0 per cent, is way above the international benchmark of 50.0 per cent, with the risk of further exposure to international indebtedness. The Bank and fiscal authority should therefore formulate effective debt management and possible debt exit strategies”.
He also emphasized the importance of promoting competitiveness and attracting investment in key sectors such as agriculture, MSMEs, mining, and infrastructure to stimulate economic growth and job creation.
Additionally, Sagagi advocated for prioritizing MSME development to foster wealth creation and formalize the informal sector.