By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) has said that its in-house model-based simulations indicate that inflation rate could fall steadily to less than 15 per cent by the end of 2023.
This was even as the apex bank reiterated that it is determined to maintain its stable exchange policy stance over the next few months through innovative policy measures to manage the demand and supply of foreign exchange.
The CBN Governor, Godwin Emefiele, stated this during the 57th Annual Bankers Award Dinner, which held in Lagos.
The short-term outlook of the global economy is increasingly bleak as the lingering effects of the pandemic-induced supply chain disruptions and economic fragmentation is worsened by the uncertainties triggered by the eruption of the Russian-Ukraine war.
The IMF has projected that more than a third of the global economies would suffer recession within the next two years, especially as the US, EU and Chinese economies stagnate.
As external conditions flounders, Emefiele said that inflationary pressure is expected to worsen and become more persistent in many economies.
He noted that the rate in key advanced economies is projected to remain historically elevated at double digit levels up to the third quarter (Q3) of 2023 at the earliest while adding that tight monetary conditions would remain prevalent over the short-term, straining financial markets in many Emerging Markets and Developing Economies (EMDEs) and exacerbating the underlying vulnerabilities.
According to him, the CBN is of the view that the short-term outlook of the Nigerian economy remains good considering the current developments in both the global and domestic economies and based on extensive simulations.
With inflation clearly being the big elephant in the room, Emefiele said that inflation expectations are rising as existing structural rigidities are compounded by global factors and anticipated elections related liquidity upsurge.
“For the rest of 2022 and towards mid-2023, Nigeria’s rate of inflation is projected to remain elevated and above the 12.5 per cent growth-aiding threshold.
“However, on the backdrop of our previous policy measures, and as the effect continue to permeate the system, our in-house model-based simulations indicate that inflation rate could fall steadily to less than 15 per cent by end of 2023”, he said.
Although the CBN has so far managed to maintain exchange rate stability, Emefiele said that the current capital flow reversals from emerging markets are expected to continue to exert considerable pressure on market rates.
According to him, this pressure could be amplified by the forthcoming elections, especially as the political marketplace heats up.
“Notwithstanding these pressures, the CBN is determined to maintain its stable exchange policy stance over the next few months through innovative policy measures to manage the demand and supply of foreign exchange.
“If the current problem of oil theft is promptly corrected, we could expect a resumed inflow of crude oil receipts into the official reserves. This could foster gross stability in the foreign exchange market and enhance exchange rate stability,” he said.