The World Bank has advised the Federal Government to tackle spiralling inflation in the country within the next six and 10 months.
Its Lead Economist for Nigeria, Dr. Marco Hernandez, who spoke during a virtual roundtable organised by the Nigerian-British Chamber of Commerce (NBCC) said Nigeria should, in the next six to 10 months, bring down the inflation rate; and enhance foreign exchange auctioning process to help investors make their investment decisions.
According to him, inflation affects the purchasing power of Nigerians. “Right now, Nigeria is growing at a slow rate with a high rate of inflation. About 5.6 million Nigerians have been pushed below poverty line within one year. Inflation is driven by increasing domestic food prices and not imported food prices. Exchange rate reforms are essential to reduce inflation and to boost growth; and inflation follows the movements in the parallel foreign exchange rate,” he said.
Tagged: NBCC Business Advocacy Roundtable, Dr. Hernandez also advised the managers of the economy to look at the connection between trade and inflation; and increase its domestic added values. He also advocated for Nigeria to examine very closely her policy interventions in the areas of exchange rate management, trade, fiscal and monetary policies, and also re-evaluate the issues of social protection.
Hernandez said the country, is at a critical juncture where it must take critical decisions to act.
He said the country cannot continue to operate business as usual, otherwise, “they can only expect the same kind of growth experienced since 2015, which will continue to witness decline in per capita income and limited job creation”.
He said Indonesia that shares similar characteristics as a country took a different policy trajectory and arrived at a different outcome.
“This means that for Nigeria to achieve a more progressive economic growth and development the country must reconsider some of her present monetary policies that will make it possible to achieve expected growth curve. Nigeria would need to create the necessary environment for investment, halt inflation, and create more jobs. Nigeria should take action to halt the declining economy,” he said.
Also present during the virtual meeting was Director, Monetary Policy Department, Central Bank of Nigeria (CBN), Dr. Hassan Mahmud.
Responding to a question by Toyin Sanni on how the CBN rates itself against its set objectives, Dr. Mahmud said the apex bank is effectively managing the interest rate regime, which is critical to the real sector and for providing attractive investment environment, and also the foreign exchange regime where significant volatility has been witnessed. He added that in trying to tackle the exchange rate volatility and manage other CBN functions, the apex bank has employed monetary targeting options including open market operations, liquidity forecasts templates, and others with the aim to bringing down inflation. He said though short term measures may be deployed but the structure of the economy has a role to play in the effectiveness or otherwise of these measures.
“Every economy must have set objectives, and set framework to achieve those objectives. Our policies are geared towards making the country export driven rather than import dependent. We should then look inwards to grow the Nigerian economy, to a competitive level to enable it play at the global stage. We must then play at a global standard. If we do not look inwards, if we do not take our destinies in our hands, we will have ourselves to blame,” Mahmud said, adding that the economy must be developed first, before talking about addressing the exchange rate.
NBCC, however, advised the managers of the economy to build a coherent monetary policy framework strategically targeted at improving growth and national development.
Its President/Chairman in Council, Bisi Adeyemi, said the economy was highly dependent on oil as the major source of government revenue and foreign exchange earnings. “Over the years, for various reasons, we have witnessed significant depletion of the country’s foreign reserve. But things are changing,” she said.
The forum was sponsored by Bank of Industry (BoI) and Boston Consulting Group.
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