Control excess liquidity to tame inflation, MPC member tells CBN

Professor Adeola Festus Adenikinju of the Monetary Policy Committee of the Central Bank of Nigeria (CBN) has said the security situation in Nigeria is hindering economic recovery from the pandemic. He said this at the MPC meeting which was held in May.

He said that while the Central Bank of Nigeria efforts had set the economy on the trajectory of growth, the security challenges had a negative impact on it. He also said that the insecurity was fuelled by rising poverty and unemployment rates. Adenikinju said, “The economic recovery rate is still very weak and fragile. Poverty and unemployment rates are still quite high.

The security situation in the country is hurting economic recovery, while at the same time, poverty and unemployment also contribute to the worsening security challenge we have.” He noted that there was a need to continue and expand the credit facility targeted at the Agri-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS) which had proved helpful. He said, “As we enter another planting season, the effect of climate change may have negative impacts on food prices in the latter part of the year. The current efforts of the CBN to promote dry season agriculture would be quite helpful. There is a need to expand the Targeted Credit Facility (TCF) and the AgriBusiness/Small and Medium Enterprises Investment Scheme (AGSMEIS) to ensure more Nigerians benefit from the programme.” The don added that it was important that CBN monitored the network of the credit facility to ensure that it fulfilled its objectives. He said, “In addition, regular evaluation of the programmes is necessary to ensure they meet their objectives.”

He also mentioned that it was important to combat domestic inflation which had continued to rise. He asked the CBN to “use the various administrative tools at its disposal to control excess liquidity in the system.” Another member of the committee, Robert Asogwa, a macroeconomist at the African Development Bank (AfDB) said the relaxation of the trade restrictions in Nigeria would strengthen the service sector over the next few months.

Asogwa said, “It is expected that recent relaxation of restrictions amongst Nigeria’s trading partners and Government’s derestriction guidelines should accelerate activities related to the trade and entertainment sub-sectors. This will surely provide some offset to the Service sector weakness over the coming months.” In May, the MPC voted to retain the Monetary Policy Rate (MPR) at 11.5 per cent, this vote was supported by all members of the committee.