The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has called on Nigerians to adopt the fundamental economic principles in order to control the country’s Inflation which has just risen to 32.70 percent. Cardoso stated this recently during a question and answer session at the 30th Nigerian Economic Summit in Abuja, which covered crucial issues such as the rising inflation, monetary policy, and the state of Nigeria’s economy. As he discussed the nation’s economic situation, Cardoso underlined the vital need of restoring economic fundamentals in order to address economic challenges and guarantee long-term stability.
He emphasized that the two most important economic issues are efficient institutions and balanced supply-demand dynamics, adding that trade-offs would only provide temporary fixes in the absence of robust economic fundamentals. The CBN governor recognized that recent Monetary Policy measures, which aim to reduce inflation, have generated controversy. These measures include interest rates hike from 26.75% to 27.25% and altering the bank’s Cash Reserve Ratio (CRR). Cardoso reaffirmed his stance, stating that this action is required to control the nation’s excessive inflation, which has reduced purchasing power, deterred investment, and eventually harmoered the industrial sector.
Fiscal policy is another essential fundamental.
Cardoso gave a cautiously optimistic overview of the CBN’s long-term goals to stabilize the Nigerian economy. He claimed that a balanced strategy would eventually enable lower interest rates as inflation reduces, facilitating the growth of businesses. In his responses, Cardoso reaffirmed the CBN’s dedication to Economic Stability and urged cooperation in diversifying Nigeria’s economy, particularly away from its reliance on oil, in order to achieve sustainable growth. Experts also concur that Nigeria needs to adopt fundamental economic principles in order to effectively control inflation, starting with tightening its fiscal and monetary policies.
In response to inflation, the Central Bank of Nigeria has tightened monetary policy and raised interest rates to curb money supply and moderate demand. Critics counter that while Interest Rate increases have been crucial, it cannot be the only way to address Nigeria’s inflation issue, given that the majority of inflation is driven by cost rather than demand. Nigeria’s fiscal policy is another essential fundamental that cannot be disregarded. Experts like Dr. Muda Yusuf, the CEO of the Centre for the Promotion of Private Enterprise (CPPE), has contended that the Nigerian government needs to implement a more stringent fiscal policy to control the rising inflation.
Experts support measures that draw in foreign investment.
Stabilizing the value of the Naira has also been recognized as a fundamental to controlling inflation. Over the years, the Central Bank of Nigeria has used a number of different currency rate structures; the most recent being a more flexible managed float. Nigeria’s reliance on imports, poor foreign reserves, and strong demand for foreign money have all contributed to the naira’s recent struggles against the dollar. Economists support measures that draw in foreign Investment and broaden the nation’s Export market in order to stabilize the currency and lower import inflation.
Ongoing reforms in the oil sector, including the Petroleum Industry Act (PIA), is anticipated to enhance Nigeria’s oil output and foreign exchange profits. However, it will take some time for these improvements to have an impact. Forecasts by the World Bank and African Development Bank (AfDB) forecasts suggested that Nigeria’s inflation rate could remain high throughout 2024, declining only marginally by year’s end. Echoing these views, the AfDB observed that comprehensive changes in infrastructure, agriculture, and Finance might help the government limit inflation.
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President Bola Tinubu’s administration has already commenced policy implementation to address these structural problems. If these efforts are maintained over time, they may contribute to a medium- to long-term decrease in inflationary pressures. By adopting strong economic fundamentals, increasing productivity, and putting structural changes into place, Nigeria may lessen the current Inflationary Pressures and create a more stable, wealthy Economy in the future. As noted by economic experts, the Nigeria government needs to stick with its current course and give priority to policies that boost growth, cut expenses, and raise the standard of life for all Nigerians.