Inflation: Deploying monetary tightening tools won’t work, experts tell CBN

Some experts have advised the Central Bank of Nigeria, CBN, to review its monetary policy tools in order to tame the rising inflation.

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

Yusuf said this while reacting to the November inflation rate of 21.47%, as released by the National Bureau of Statistics (NBS), yesterday.

The headline inflation accelerated to 21.47% in November as against 21.09% in October.

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

According to him, the deployment of monetary tightening tools should be suspended because the Nigerian economy is not a credit-driven economy, adding that previous deployments have been inconsequential in taming inflation.

Yusuf as at October, credit to the private sector as a percentage of Gross Domestic Product (GDP), was 22.7% in Nigeria, compared to 32% in Kenya; 96% in Morocco; 193% in Japan; 143% in the United Kingdom; 216% in the United States; and 39% average for sub-Saharan Africa.

Inflation restraining strategies should accordingly focus on productivity boosting supply side factors and reduction in ways and means funding of deficit.

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

He argued that inflation in Nigeria cannot be less than 50%, seeing as the prices of commodities continue to soar each passing day.

Kuti-George attributed the country’s inflationary pressures to its dependence on imports 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 the very small businesses.

He said: “Small and Medium Enterprises (SMEs) in Nigeria are about 90%, accounting for majority of the employment.

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

“There’s is also a need to create more grants than loans to give start-ups the soft take-off required to produce more, create more, employ more and grow the economy.”

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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