Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, has disclosed that the country’s inflation rate could rise to 12 percent. However, this will not have any effect on the current monetary policy stance of the Apex bank, he said
As a matter of fact, the CBN insists on maintaining the monetary policy because of the projected inflation rate. The inflation rate stood at 11.31 percent in February 2019, according to statistics by the CBN and the National Bureau of Statistics (NBS).
Emefiele made the disclosure during his presentation at the Businessday post-election economic agenda conference which held in Lagos on Thursday.
“THE CBN HAS SET THE POST-ELECTION AGENDA FOR THE NATION’S MONETARY POLICY, PROJECTING THAT THE CURRENT MONETARY POLICY STANCE OF THE BANK IS EXPECTED TO CONTINUE WHILE INFLATION IS ESTIMATED TO RISE TO 12 PER CENT AND MODERATE THEREAFTER.”
How does this affect you: The possible rise in inflation rate is coming at a time the Federal Government and the legislature have agreed to a minimum wage of N30, 000 for Nigerian labour workers. If or when the inflation rate rises, it may trigger an increase in the cost of living. This is because hike in prices influences inflation rate.
Recall that Nairametrics had also reported that the Federal Inland Revenue Services is considering raising the Value Added Tax (VAT); although FIRS has since denied the report. If these rises in Inflation rate and VAT eventually occur, then the value of the proposed minimum wage increment becomes ineffectual.
CBN considering adjustment in policy rates
While the projected 12 percent rise in inflation rate would encourage the CBN to maintain its monetary policy, unfolding conditions and outlooks will influence the apex bank to make changes in the policy, Emefiele said.
Building on 2018 policy framework: The Central Bank intends to continue from where it left off in 2018. Emefiele said the goal is to ensure that the policy interest rate is set to balance the objectives of price stability with output stabilisation.
Factor that triggered the inflationary projection is productivity gains in the agricultural and manufacturing sectors. He also said Gross Domestic Product is expected to pick up in the first half of the current year, owing largely to the continued efforts at driving indigenous production in high-impact real sector activities.
Meanwhile, CBN will maintain its stable exchange rate over the next year despite expected pressures from the volatility in the crude oil markets.
“GROSS STABILITY IS PROJECTED IN THE FOREIGN EXCHANGE MARKET, GIVEN INCREASED OIL PRODUCTION AND CONTAINED IMPORT BILL.”
Also, the country’s Balance of Payments would remain positive in the short-term, while Nigeria’s current account balance could improve further if oil prices continued to recover.
“THIS WILL BE SUPPORTED BY IMPROVED NON-OIL PERFORMANCE AS DIVERSIFICATION EFFORTS BEGIN TO YIELD RESULTS TO REDUCE UNDUE IMPORTS.”
Emefiele warns recession still hovering on Nigeria
According to Emefiele, the factors that led to the economic crisis are still very much visible. On how to overcome the possibility of another recession: Emefiele suggested that there’s a need to;
- Increase the country’s policy buffers, including fiscal measure, to increase its external reserve.
- Also, diversifying the revenue structure of the Federal Government is of the utmost importance in order to reduce dependence on direct proceeds from the sale of crude oil.
- Cheap financing would be provided to boost local production of priority goods in critical sectors of the economy in order to reduce reliance on foreign imports.