The Central Bank of Nigeria (CBN) will be hurting ambitions to boost financial inclusion in Africa’s most populous nation if it doesn’t tame inflation, according to Doyin Salami, a former member of the Monetary Policy Committee (MPC).
Headline inflation in Nigeria has snapped an 18-month long deceleration after increasing marginally in the months of September and October.
Now down to 11 percent from as high as 18 percent in January 2016, inflation rate remains higher than the preferred band of between 6 to 9 percent and that has made the CBN hold interest rates at 14 percent for two years now.
That’s despite pressure from the federal government to ease rates to stimulate growth in an economy still licking its wounds from a contraction in 2016.
However, Salami, who spoke at the Lagos Business School and BusinessDay financial inclusion conference Thursday, said cutting rates and allowing inflation remain in double digits would hamper financial inclusion in a country where over 40 percent of bankable adults do not own bank accounts.
“The CBN must fight inflation to encourage the use of financial products and services, because if the cost of goods and services as well as borrowing costs rise, less people will want to borrow,” Salami said.
“When I hear people say economic growth should take the priority over inflation for the CBN, I am not sure that can work,” Salami added.
Nigeria targets financial exclusion of 20 percent by 2020, an ambition Salami said may be over optimistic.
