The Monetary Policy Committee has enjoined the Central Bank of Nigeria (CBN) to enforce strong will in stabilising the Naira so as to tackle and control inflation and contraction in the economy. This was revealed in a communiqué issued by the CBN titled, Central Bank of Nigeria Communiqué No 132 of the Monetary Policy Committee of September 21 and 22, 2020, with Personal Statements of Members.
The committee said to abate inflationary pressure on the economy in the third quarter and subsequently, the management of the CBN had to stabilise the exchange rate and provide funding to such sectors that would “resolve the supply constraints in petrol pricing, energy pricing and food availability”. They also stressed that steps should be focused on expanding the monetary policy.
The MPC said to abate the pressure, CBN had no choice but to pursue an expansionary monetary policy using development finance policy tools, targeted at raising output and aggregate supply to moderate the rate of inflation.
The committee agreed that due to meagre funds and the downfall in crude oil prices, a fiscal policy was unlikely to moderate inflation, unlike a monetary policy where the CBN would control the money supply by giving out more consumer loans to assist buying as well as financial support to micro, small and medium enterprises (MSMEs) so as stabilise the economy.
“At present, fiscal policy is constrained and so cannot, on its own lift the economy out of contraction or recession given the paucity of funds arising from weak revenue base, current low crude oil prices, and lack of fiscal buffers and a high burden of debt services.”
“Therefore, monetary policy must continue to provide massive support through its development finance activities to achieve growth in the Nigerian economy. This is the reason MPC will continue to play a dominant role in the achievement of the goals of the Economic Sustainability Programme (ESP) through its interventionist role to navigate the country towards a direction that will boost output growth and moderate the level of inflation.”
Aisha Ahmed, deputy governor of CBN, in her personal statement, said that the weak outlook of economic activity in the second quarter showed that easing of the monetary policy would help with rising unemployment. She voted in favour of lowering the monetary policy rate by 100 basis points from 12.5 per cent to 11.5 per cent.
