The CBN should resist the temptation to further increase the Monetary Policy Rate, some experts warned.
‘s recent decisions regarding the benchmark interest rate and other monetary policy issues in the country.
A former deputy governor of the CBN, Kingsley Moghalu, and a policy expert, Damian Ude, in a policy brieftitled, “Inflation and Poverty in Nigeria: Explainer,” for the Institute for Governance and Economic Transformation warned against further hike in the rate. “Tightening the money supply remains important, but this should be pursued through other means of controlling the rate of money creation.”The experts also advised that the bank reduce its advances to the federal government to curb inflation, with reference to the deficit financing of the national budget through the N22.7 trillion Ways and Means Advances by the Central Bank of Nigeria to the federal government.
“However it will lead to higher borrowing rates and negatively affect companies and manufacturers that borrow capital for their survival. If unchecked it could also lead to an economic recession as higher rates slow down productivity and increase unemployment” he said. “That is why you see that despite the increased hike last year, inflation still went up. Some will say that they expect CBN to hold the rate or drop it but it is too early to say.”
“Fuel prices may even increase more and that would mean that prices will jack up because petrol is an input factor for most industries.
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