In the bustling streets of Buenos Aires, Argentina’s capital, the impact of a politically-controlled central bank is vividly felt by the average Argentine.
For Argentines, each trip to the grocery store reveals yet another increase in the cost of bread, milk, and vegetables. The people work tirelessly but the rapidly devaluing peso means their earnings barely cover their monthly expenses.
Annual inflation climbed to 289.4 percent in April, the Argentine government statistics agency.
Prices however rose at a rate of 8.8 percent on a monthly basis, down from 11 percent in March and well below a peak of 25 percent last December, when Javier Milei became president with a mission to combat the country’s dizzying inflation, among the highest in the world.
One of the most immediate and devastating effects of a lack of central bank independence which Nigerian lawmakers are hoping to achieve with a controversial amendment of the CBN Act is chronic inflation.
The lawmakers are in the process of a review of the 2007 CBN Act with an aspect of the amendment seeking to place monetary policy decisions in the hands of the Minister of Finance.
A so-called Coordinating Committee for Monetary and Fiscal policies, which the lawmakers propose will be chaired by the Minister of Finance, aims to strip the CBN of its power to determine interest rates, limiting the bank from achieving its primary mandate of price stability.
When Argentine politicians had control over the central bank, they printed money to fund government deficits as politics trumped economics in monetary decision-making.
This practice led to an increase in the money supply without a corresponding increase in goods and services, resulting in high inflation. A situation Nigeria is all too familiar with, following the Godwin Emefiele-led CBN’s illegal printing of cash in loans and advances to the government.
Frequent political interference in the Argentine central bank’s monetary policy has also led to the repeated devaluation of the peso as inflation skyrockets.
President Milei has devalued the peso by 50 percent since he assumed office in December but there remains a wide gap between the official and unofficial rates of the currency.
Argentina’s peso plunged on the black market last week after months of stability.
The peso has fallen more than 15 percent against the dollar over the last week to a record low of 1,300 on the black market, where Argentines go to sell their chronically depreciating pesos.
The fall was the fastest in a seven-day period since a volatile period shortly after Milei took office in December.
Each state of the peso has eroded the public’s trust in the national currency, pushing people to seek more stable foreign currencies, like the US dollar, for their savings.
This lack of confidence exacerbated capital flight and reduced the country’s foreign reserves, making it even harder to stabilise the economy.
For small business owners, it has meant higher costs for imported goods and services, which are often passed on to consumers, further fueling inflation.
The inability of the Argentine central bank to operate independently resulted in persistent economic instability, analysts say.
Political leaders often prioritise short-term gains over long-term stability, leading to erratic monetary policies that destabilise the economy. This instability discourages both domestic and foreign investment, stymieing economic growth and innovation. For the average Argentine worker, this means fewer job opportunities and lower wages, trapping them in a cycle of poverty and economic uncertainty.
The compounded effects of chronic inflation, currency devaluation, and economic instability have led to increased poverty and inequality in the South-American country.
The cost of living continues to rise, while wages stagnate, disproportionately affecting the most vulnerable populations.
