Nigeria’s inflation beyond monetary policy, says NES president

Nigeria’s inflation has gone beyond raising rates and implementing other monetary instruments in anticipation of a decline, according to Adeola Adenikinju, president of the Nigerian Economic Society (NES).

Adenikinju said while the Central Bank of Nigeria’s (CBN) focus has been to cool prices, its approach to inflation control and exchange rate management is “inadequate” and “incomplete”.

“Nigeria’s Inflation is more than a monetary phenomenon. The monetary policy instruments would only address the monetary component of Inflation,” the NES chief said in a post on social media LinkedIn Wednesday.

“Other structural components would not be impacted and the over reliance on monetary instruments would simply inflict more punishment on the entire economy,” he added.

Slowing in July and August, Nigeria’s inflation began its upward trend in September at 32.7 per cent before it expectedly rose to 33.88 per cent in October, making a case for another rate hike next week.

The Olayemi Cardoso-led CBN has been adopting unorthodox policies in its fight to bring inflation under control. It has so far raised benchmark interest rates by a cumulative 850 basis points to 27.25 per cent within a year.

Adenikinju, describing how inflation has shrunk the value of the naira, said “inflation has dealt the value of the naira a heavy blow”. “We now carry around a national currency bill that has lost much of its value”.

The professor of Economics said with the current inflationary trend the CBN would spend more than a thousand naira to print the N1,000 naira note, highlighting the need to either rein in prices or “rethink the highest denomination of the naira”.

He considered the dwindling value of the country’s highest denomination a “national shame”, stating that the redenomination of the naira may not solve the problem.

Adenikinju stated that the country’s current inflation management is very high and costly to the economy, calling on the monetary authority to bring in the fiscal side, all the levels of government, the private sector and other stakeholders including market associations on the table.

“The CBN should also rethink its exchange rate management approach as the current exchange rate also impacts on the Inflation rate. There is a need for more research and engagement of local researchers and academics in economic policy management in Nigeria,” he said.