By Anthony Otaru, Abuja.
Financial experts have advised President Bola Tinubu and his economic team on how to keep inflation down in 2025.
They suggested that the Central Bank of Nigeria (CBN) ensure that monetary and fiscal policy work together to stimulate investment, production, and credit access and reduce the country’s inflation rates.
Speaking exclusively with ThisNigeria yesterday, a retired professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, in Ogun State, Sheriffdeen Tella, noted that as long as investment and production remain low, the Central Bank of Nigeria (CBN) will continue to raise the Monetary Policy rates in the year 2025 given more room to inflation hikes.
Also, renowned Economist Prof Pat Utomi said that a balance between monetary and fiscal policies must exist for rising inflation to be reduced.
A cursory look at the Monetary Policy Committee (MPC) meetings held throughout the outgoing year showed that CBN raised its key interest rate six times in 2024, citing renewed inflation and exchange rate pressures in Africa’s most populous country.
According to the apex bank, the decision to raise the Monetary Policy Rate (MPR) by 25 basis points to 27.5 percent took the year’s hikes to a cumulative 875 base points even as most economists polled by ThisNigeria had predicted more policy tightening going forward.
For the record, inflation rose to 33.88 percent in annual terms in October for the second straight month, continuing the country’s worst cost-of-living crisis in decades.
The CBN governor, Olayemi Cardoso, said at the last MPC meeting that food and energy prices were key contributors to the uptick in inflation and that persistent pressure on the country’s naira currency was a concern.
“Members, therefore, agreed unanimously to remain focused in addressing price developments,” he said in a news conference.
Cardoso said the CBN was committed to the ‘war against inflation’ and expected the results of its tightening steps to be more visible in the first quarters of 2025.
However, Tella said the MPC meetings held in 2024 had followed a restrictive monetary policy that has been in place since Godwin Emefiele’s time.
The committee, he said, has continued to raise the interest rate, which keeps the cost of borrowing on the higher side and, hence, the cost of production at high levels as well.
Unfortunately, he said that credit to the private sector remained restricted, adding, “The economy remains characterized with slow growth, if there’s any growth at all.
“Lack of expansion in the economy has kept output and employment at low levels, the committee erroneously believe that inflation in Nigeria is caused by demand pull rather cost-push, there’s need for reassessment of the policies to move forward.”
Similarly, Utomi said that with increasing inflation, the MPC will continue to raise interest rates to restrict the money supply.
He, however, admitted that it is a dilemma to stimulate the production of food, goods, and services by adopting the Monetary Policy instrument alone on the economy, adding that there was a need to strike a balance between the MP and fiscal policy.
The erudite professor said, “This is because fiscal policy gives impetus to production. Then you can begin to say that at what level of money supply will improve access to credit to, therefore, facilitate investment and production. Unfortunately, there is no clarity on the fiscal stimulation of the economy. So, this is where the biggest problem is. If you neglect the fiscal policy that ensures production, then you are in trouble.”
He said, “You cannot scale up the economy with just the Monetary Policy alone. Both have to go together; that is, the monetary and fiscal policies must go together.”
