Home » Articles, CBN (Central Bank of Nigeria), Columnists, Emeka Chiakwelu, NNP Columnists » Sanusi’s CBN & waning of Monetary Policy as tool to control rising Inflation – By Emeka Chiakwelu

Sanusi’s CBN & waning of Monetary Policy as tool to control rising Inflation – By Emeka Chiakwelu


By Emeka Chiakwelu, NNP – May 7, 2011 – Nigeria’s Inflation rate increased from 11.1 percent to 12.8 percent

The inflationary pressure is escalating and at 12.8 percent inflation rate
recorded at the ending of first quarter of 2011 is not showing any sign of
coming down.  According to the data coming from the National Bureau of
Statistics (NBS) the February inflation rate stood at 11.1 percent and
since then has increased to 12.8 percent at the month of March.

The Central Bank of Nigeria (CBN) maybe gradually losing its grip on the
rising inflation with its primarily application of monetary policy and
should sought the aid of the presidency  to utilize trade and fiscal
policies  to solve the problem of the persistent double digit inflation.

The difference between months of February and March Composite Consumer
Price Index (CPI), a tool to measure inflation rate stood at 1.37 percent.
That is not a good development.

The deduction to be made is that the power of monetary policy that comes
with the usage of interest rate to hold a grip on inflation is waning.  A
while ago the Central bank of Nigeria raised the monetary policy rate from
the previously 6.5 percent to 7.5 percent but it did not necessarily have
any effect on the surging inflationary trend. Instead of the interest rate
to be de-escalating rather it is accelerating at 1.7 percent, giving the
month of March a higher interest rate at a double digit of 12.8 percent.

The Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido
the surging inflation to rising food prices and energy cost.  There is no
doubt that the chieftain of CBN understood quite well what the beef is all
about. But the reasons he tendered for the rising inflation are secondary
and insufficient. The fundamental problem that Nigeria has is its major
reliance on importation for essential commodities needed in the country.
These are the primary problems that are making the inflationary pressure
to be going up. Nigeria imports food, textiles and refined petroleum from
abroad. The domestic oil refineries are not producing at optimum levels
and importation becomes necessary with the subsidy.

In the consumer price Index (CPI) food and energy products are quite
significant because these are products needed by all the sectors of the
population for surviving and for the economy to thrive. With these
importations Nigeria is exposed to global changes in prices of food and
petroleum products. Therefore as the prices of oil and food increases due
to global demand and anxiety in the market that subsequently has effect on
economy of Nigeria and put untold pressure on inflation.

The lowering and control of inflation in Nigeria for sustainable growth
must be strategically planned and implemented. Monetary policy with its
Interest rate can be utilized as in tactical approach to limit the power
of inflation at a short term but in long term more should be done.  The
idea is to maintain a sustainable inflation rate at a single digit for a
long term economic growth and development.

The executive of the government has an important role to play in shaping
the economic destiny of the nation and not abandoning the battle to defeat
and tame inflation to the bureaucrats at Nigerian apex bank. To all and
sundry it is becoming self-evident that the tightening of monetary policy
has a limited effect in long term prospects waned and as the fundamental
problems that plagues the economy persisted.

The Nigerian annual economic growth is cruising at a comfortable level of
above 7 percent but the increasing inflationary pressure is about to do
one or two to the economy. Inflation by discouraging of the investors and
by severely weakening of the country’s currency naira can slow down
economic growth and probably reverse the net gain effect.

This is not the time for government to fold their hands and become
reluctant observer. But no one is asking the executive arm of the
government to weaken the independence of the Central Bank by intervening
in the affairs of the autonomous apex bank. The financial actors and the
Economic gatekeepers in the government must be pro-active, strategic and
pragmatic. The executive arm must be serious about cutting down on
importation and fixing the oil refineries in the country to avoid refining
of petroleum abroad.

This is time to be serious and not time for empty postulations, for we all
can agree on what must be done. The government should work with textile
and cement importers to find ways to slow down importation while
increasing the usage of local materials for production. Nigeria has
abundant raw materials for manufacturing cement and textile. The importers
should be given tax breaks and other incentives that will compel them to
look into local production with the home grown raw materials.

The rising price of food including corn and rice are contributing to the
rising inflation. There is a global demand for some of Nigeria’s staple
food that is imported. Nigerian government should be in partnership with
large scale domestic farmers without being overbearing to them. Investment
in research and development in the agricultural becomes necessary in order
to find the solution to the problems of food storage and preservation.
Food preservation will be needed to boost higher food production and
sustainability therefore cutting down on food importation. Monetary policy
as tool to control rising inflation is waning therefore CBN must look
beyond its monetary policy tool to cool off inflationary rising
Emeka Chiakwelu is the principal Policy Strategist at Afripol. Africa
Political and Economic Strategic Center (Afripol) is foremost a public
policy center whose fundamental objective is to broaden the parameters of
public policy debates in Africa. To advocate, promote and encourage free
enterprise, democracy, sustainable green environment, human rights,
conflict resolutions, transparency and probity in Africa. www.afripol.org

Short URL: http://newnigerianpolitics.com/?p=8081

Posted by on May 7 2011. Filed under Articles, CBN (Central Bank of Nigeria), Columnists, Emeka Chiakwelu, NNP Columnists. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Leave a Reply

Naira begins new week on negative note


Biafra Referendum: EU confirms Ekpa’s petition, sends invitation


Browse Elections 2023

Featuring Top 5/118 of Elections 2023

Tinubu asked to release photos taken with investors in France

Browse Africa & World Politics

Featuring Top 3/2322 of Africa & World Politics

Browse National Politics

Featuring Top 5/1293 of National Politics

‘I must be President of Nigeria’, someday – Peter Obi insists

Browse NNP Columnists

Featuring Top 10/1542 of NNP Columnists

Thank you for tolerating me – Buhari begs Nigerians for forgiveness



Atiku Abubakar withdraws court application for electoral materials sorting


© 2023 New Nigerian Politics. All Rights Reserved. Log in - Designed by Gabfire Themes