CBN tasked to look beyond orthodox method to control inflation

With Nigeria’s inflation at 22.7%, with its attendant consequences on pricing and consumer purchasing power, Central Bank of Nigeria, CBN has been tasked to look beyond the orthodox method and text book theories in curbing inflation.

Periodically, CBN uses Monetary Policy Rate, MPR or interest rate to control inflation but speaking to newsmen recently, Funmi Ekundayo, President of Institute of Chartered Secretaries and Administrators of Nigeria, ICSAN said “this doesn’t seem to be working for us”

She said CBN has over the time tried to control inflation by increasing interest rate. “From what the text books tell us, that ordinarily should have had an impact in reducing inflation but what we see is not working. I believe government should look beyond management of interest rate to curb inflation”.

According to her, the generally believed notion is that when monetary authorities increase interest rate, this will incentivise savings and there will be less borrowing and perhaps this will reduce spending and consequently inflation can also be reduced but she said “this has not been working for us”.

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The ICSAN new president, the first female president in the institute’s 57 years history said there are so many areas that government can look into to make the economy more efficient.

Ekundayo advocated for economic policies that take into consideration Nigeria’s peculiarities and economic situation.

“There is therefore the need for government through the CBN to continuously assess monetary policies with a view to checking out whether those policies are giving the objectives for which they are implemented. If they are not achieving the objectives, we should not be shy of rejigging and tweaking as required”, she said.

The ICSAN president also looked at the Nigeria’s high external debt burden and said the current position of external debt is not healthy for the economy. She said debt in itself is not bad thing, but the utilisation of that debt is what is key.

According to her, “in a situation where major percentage of the fund raised is used for recurrent expenditure, that is definitely not healthy, but if government tailors it into critical and key sectors of the economy that can become a revenue generating asset, we would be sure that the revenue would be adequate enough to take care of servicing and paying the debt”.

On infrastructural development seen as critical for economic growth, Ekundayo proffered Public Private Partnership, PPP arrangement to address infrastructural gaps. With this, “the private sector is brought in to fund infrastructure projects which will reduce the capital required under the budget to fund those projects and therefore free some funds for government to use for other things. This will checkmate budget deficit”, she said.

On ways to reduce cost of governance, Ekundayo said there is clear connection between high cost of governance and the country’s sub-optimal developmental outcomes in real terms. She asked government to address duplication of functions in MDAs and restructure MDAs to be more effective. “If there are overlapping functions, we can merge ministries and MDAs to reduce costs of governance”.

The ICSAN president also shared the road map of her administration for the next two years. She said her administration will concentrate of empowering ICSAN members with professional skills, leverage technology to generally improve the quality of the institute’s programmes and ensure that ICSAN secretariat building is commenced.